Government nod for Cairn-Vedanta deal won't come easy

The government will not approve Vedanta Resources Plc's plan of picking up 'strategic' stake in Cairn India Ltd without proper scrutiny, as it would involve indirect sale of oil fields in Rajasthan, which account for over 90 per cent of Cairn India's assets.

''Domestic oil and gas blocks are national assets. Energy firms are merely contractors. A third-party can't be allowed to manage national assets without the government's permission,'' petroleum secretary S Sundareshan told reporters in New Delhi on Friday.

He said the country's oil and gas assets auctioned for exploration and production are managed through a production-sharing contract between the government and energy firms. ''I am reasonably sure that there is a provision in every one of these production-sharing contracts for getting government approval prior to such changes in ownership,'' he said, implying that the government may look at the deal closely.

UK-based Cairn Energy, the parent company of Cairn India, will also require consent of the state-owned explorer Oil & Natural Gas Commission, CIL's partner in the Rajasthan oil fields.

ONGC owns a 30-per cent stake in the Rajasthan oil fields. The company will hold a board meeting to discuss the strategic stake sale in Cairn India, ONGC chairman and managing director R S Sharma told The Economic Times. ''I can't offer any comment on this issue before the board meeting,'' he said.

Officials in various economic ministries said that in the case of a minority stake sale it is easier to approve the proposal, but a 'strategic' sale would require thorough scrutiny as it involves a change in the management of the oil field.