Delhi HC seeks govt's stand on rejection of Vedanta Gujarat field contract extension

New Delhi: The Delhi High Court on Monday asked the Centre to clarify whether broader policy considerations formed the basis for rejecting Vedanta Ltd's bid for a 10-year extension of its production-sharing contract for the offshore oil and gas block in Gujarat's Cambay Basin.

A division bench of Justices Dinesh Mehta and Rajneesh Kumar Gupta, hearing Vedanta's appeal against a single judge's order upholding the rejection, observed that if the Union government's decision was influenced by a broader policy shift, it ought to disclose that position before the court.

"We want the Union of India's response. If there is any other reason, the government can satisfy the court. It should either come from the Attorney General's mouth, or it should come by way of an affidavit," the bench observed.

While the bench indicated that an affidavit from the Centre would assist the court in understanding its stand, it stopped short of directing the government to file one after Attorney General R. Venkataramani sought time to obtain instructions. The matter has been listed for further hearing on Wednesday.

The court's observations came after senior advocate Jayant Mehta, appearing for Vedanta, argued that the Centre could not justify its decision on grounds beyond those contained in the September 2025 rejection order. He contended that there was no indication that the government had abandoned the 2017 policy governing extensions of production-sharing contracts.

"Not a whisper that we are scrapping the policy of 2017. Even in the impugned communication, not a whisper that we are scrapping the policy of 2017. The policy continues as of date and under the policy, they have already extended as many as three PSCs in respect of other contracts in March 2026," Mehta submitted.

The hearing centred on whether the government's rejection was confined to the reasons recorded in the September 2025 communication, or also reflected a broader policy shift away from the production-sharing contract regime towards a revenue-sharing model.

During the hearing, the bench observed that the government was free to change its policy after more than two decades if it believed a different contractual framework would better serve the public interest.

The bench also observed that the government's policy should be applied uniformly and not selectively. It questioned how the Centre could reject Vedanta's application while granting extensions to other production-sharing contracts under the same 2017 policy. The court said that if the rejection was based on a broader policy shift, the government should clearly place that position before the court.

Attorney General R. Venkataramani submitted that the government was entitled to take a broader policy view while deciding whether to extend production-sharing contracts. "If the government thinks, 'If we have to go on having this kind of a dialogue with the contractor where I am not satisfied... why don't I now, in public interest, under the Public Trust Doctrine, go for a better return?'" Venkataramani submitted.

The case stems from the Centre's September 2025 decision to reject Vedanta's application for a 10-year extension of the production-sharing contract for the CB-OS/2 offshore oil and gas block in the Cambay Basin on the grounds that the company had unilaterally deducted the government's share of profit petroleum to offset its Special Additional Excise Duty (Saed) liability, making it ineligible for an extension under the 2017 policy.

On 22 July, a single judge of the Delhi High Court upheld the decision, prompting Vedanta to appeal to the division bench.

Queries emailed to Vedanta and the Directorate General of Hydrocarbons remained unanswered till press time.