Cairn-Vedanta deal finally through after cabinet nod
25 January 2012
The cabinet committee on economic affairs headed by Prime Minister Manmohan Singh on Tuesday gave its final approval to the purchase of Cairn Energy Plc's Indian oil assets by Vedanta Resources Plc for $8.48 billion.
The deal has proved more troublesome than either company probably expected. It was conditionally cleared in June, after the concerns of Oil & Natural Gas Corp, Cairn India's partner in the onshore Rajasthan oil fields, over royalty and cess payments were addressed to its satisfaction (See: Cairn bows to govt conditions on stake sale to Vedanta).
The latest hold-up was caused by the home ministry pointing to alleged global and domestic "transgressions" by Vedanta Group. On 25 November it had pointed to eight instances of the mining group or its affiliates being involved in cases of default of payment, human rights violations or environmental damage.
However, the petroleum ministry told the CCEA that the material provided by the ministry of home affairs had no direct bearing on the proposed deal or even on security aspects; and the CCEA agreed.
The oil ministry argued that there was no reason for the deal to be influenced by factors such as Norway's government pension fund selling its holding in Vedanta, tribal protests in Niyamgiri and Lanjigarh in Orissa over Vedanta's mining projects, and the concerns of the Church of England about the group's human rights record (See: Church of England divests Vedanta investments on human rights concerns).
The planned sale of the 40 per cent stake held by Cairn Energy in Cairn India Ltd to Vedanta, announced back in August 2010, was first considered by the CCEA in April last year and approved in June with certain preconditions.
Cairn and Vedanta complied with all the preconditions and concluded the transaction last month. However, it still needed the union cabinet's approval.