Cairn-Vedanta deal gets security clearance, but concerns remain

05 Dec 2011

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The home ministry has finally cleared Vedanta Resources' $8.7 billion acquisition of a majority stake in Cairn India. The ministry, however, highlighted several areas of concern, including the numerous court cases pending against the London-listed mining group.

Vedanta and its subsidiaries face 64 legal proceedings in various courts, reports quoting various sources said.

Cairn Energy and Vedanta have already agreed to the government's condition that Cairn India pay its share of cess and royalty on crude oil produced from its Rajasthan oilfields.

The security clearance was one of the conditions that the government had set for Vedanta group acquiring stake in Cairn India from UK's Cairn Energy Plc. Vedanta had agreed to the government's stipulation of making royalty cost recoverable and paying cess amounting to Rs2,500 per tonne.
 
The burden of paying royalty to the state government had all along been on ONGC, which held a 30-per cent share in the Rajasthan block wile Cairn India with 70 per cent was exempt from paying royalty on oil recovered from its wells.

The home ministry had, last month, written to the petroleum ministry pointing to Vedanta Group's involvement in cases of "default of payment, human rights violations, environmental damage in its mining and metal projects etc in India and abroad."

The ministry had highlighted cases, including alleged customs duty evasion by Vedanta arm Sesa Goa in iron ore export case filed by revenue sleuths against Hindustan Zinc Ltd, investigation on which are still continuing.

The ministry of environment and forest had earlier rejected clearance to Sterlite Industries for mining bauxite from Niyamgiri hills.

However, since these concerns have no "direct bearing on the security NOC", the home ministry decided to clear Vedanta's acquisition of Cairn Energy's stake in Cairn India.

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