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Monday, May 16, 2011

Group of Ministers on Cairn-Vedanta deal to meet on May 27 after deadline for closing deal expires !


A ministerial panel is likely to meet on May 27 to consider Cairn Energy Plc's sale of a majority stake in its Indian unit to Vedanta Resources , a full seven days after the current deadline for closing the deal expires. 

"A Group of Ministers (GoM) headed by Finance Minister Pranab Mukherjee is scheduled to meet at 1630 hours on May 27 to vet Cairn Energy's sale of 40 per cent interest in Cairn India to Vedanta," a senior government official said here. 

Cairn and Vedanta have set May 20 as the deadline for closing the USD 9.6 billion transaction. 

Industry sources said Cairn is likely to seek another extension of the deadline in advance of its annual general meeting on May 19. 

It is not clear if the GoM would take more than one meeting to vet the proposal,

after which it has to go back to the Cabinet Committee on Economic Affairs (CCEA) -- the final approval authority in this case. 

Cairn, which had previously set April 15 as the deadline for concluding the sale, had raised a hue and cry over the government's procrastinated approach to vetting the deal, saying the timelines were sacrosanct and could not be extended. 

But a day after the CCEA on April 6 referred the deal for vetting to the GoM, the deadline was extended to May 20. 

The GoM, which, besides Mukherjee, compromises Oil Minister S Jaipal Reddy, Law Minister M Veerapa Moily, Planning Commission Deputy Chairman Montek Singh Ahluwalia and Telecom Minister Kapil Sibal, is split right in the middle on the issue of giving approval to the deal. 

The Law Ministry and Planning Commission have backed Reddy's first option of giving clearance to Vedanta only if it agrees to ONGC being allowed to recover the Rs 18,000 crore in royalty that the state-owned firm is liable to pay on behalf of Cairn India in the all-important Rajasthan oilfields. 

The Finance Ministry is in favour of Reddy's second option of the government giving consent without any precondition and taking appropriate decisions to protect ONGC's interests. 

The GoM to vet the Cairn-Vedanta deal was originally to have its first meeting on May 2. 

The ministerial panel was to deliberate on whether Vedanta, with no experience in oil and gas sector, should be given unconditional approval for buying a company that owns the nation's largest onland oil fields or given clearance after attaching reasonable conditions. 

The official said Reddy had listed two options. The first was giving approval subject to state-owned ONGC being allowed to recover the Rs 18,000 crore it is liable to pay in royalty on behalf of Cairn India. 

Alternatively, he suggested that the government gives its consent to the deal without any precondition and take an "appropriate decision" to enforce ONGC's right. 

Oil and Natural Gas Corp (ONGC) has a 30 per cent stake in Cairn India's mainstay Rajasthan oilfields, but it is liable to pay royalty not just on its share, but also on Cairn's 70 per cent share of crude oil from the field. 


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