Cairn won't sell stake to Vedanta sans full government nod
20 August 2010
UK's Cairn Energy Plc will seek the full range of approvals from the government in a conciliatory gesture by the oil explorer to seal a transaction to sell a controlling stake in Cairn India to Vedanta Resources, according to a report.
The UK-based company will tell the government within a week about its plan to sell up to a 60-per cent stake to the London-listed miner for $9.6 billion (Rs45,000 crore), The Economic Times quoted an unnamed executive as saying, adding that contracts covering all Cairn India's assets will form part of the discussions with the government.
By doing so, Cairn Energy will be conceding the government's point that it has the right to decide on consent for the proposed deal, which involves the transfer of a controlling stake in the Indian unit to Vedanta.
The government has been insisting that since the production-sharing contracts (PSC) for some of Cairn India's assets require prior government approval, the transfer of control also needs to be cleared by it.
"They (Cairn) have certain obligations and we expect an explanation. The consent of the government is necessary for any change in ownership. So we need to examine all this and we will go purely by the merits of the case,'' petroleum secretary S Sundareshan said.
With Cairn Energy agreeing that the government has an important say in deciding the fate of its deal with Vedanta, it opens up the possibility that hard bargaining will ensue over the issues of royalty and oil development cess that have been troubling ONGC.