Cairn bows to govt conditions on stake sale to Vedanta
23 August 2011
UK's Cairn Energy Plc today said it wants Cairn India to accept all the government's conditions and agree to pay royalty and cess on the Rajasthan oilfields so as to facilitate its proposed stake sale to Vedanta Resources.
So far, state-run Oil & Natural Gas Corp has been paying the entire cess and royalty despite being a minority shareholder; it has been opposing the stake sale unless the tax burden is more equitably shared.
Cairn Energy, which owns a 52.11-per cent stake in Cairn India, "has voted to accept (government) conditions", the company said in a press statement.
The Edinburgh-based firm, which is seeking to sell a 40-per cent stake in Cairn India to Vedanta, has till now maintained that forcing its Indian unit to pay royalty and cess on the Rajasthan oil block, its most productive Indian asset, was against the signed contract with Vedanta, and would hurt minority shareholders' interests.
"Two of the government of India conditions - cess and royalty payable - are currently with Cairn India shareholders for approval, Cairn has voted to accept these conditions, with voting results due on 14 September," the statement said.
Together with Vedanta's 28.5-per cent shareholding, Cairn Energy has enough votes to get any proposal passed by its shareholders, ignoring the resolution passed by the Cairn India board in February opposing the government and ONGC preconditions.