Cairn-Vedanta deal: ball firmly in ONGC's court

The petroleum ministry has reportedly watered down its pre-conditions for approving mining group Vedanta Resources' acquisition of Cairn India, and the $9.6-billion deal now hinges on a no-objection from Cairn's partner Oil & Natural Gas Commission.

The ministry has watered down the 11 pre-conditions it had in January proposed for giving Vedanta the approval to buy a 51-per cent stake from UK's Cairn Energy, The Economic Times has reported citing unnamed officials with direct knowledge of the matter.

"But the condition that Cairn India will have to obtain a no objection certificate (NOC) from its partner (ONGC) has been retained," one of the officials said.

State-owned ONGC holds a stake in eight out of 10 properties held by Cairn India in the country. The ministry is of the view that the change of control of Cairn India amounts to an indirect assignment or transfer of participating interest in the blocks and so there is a need for the government as well as the partner's nod.

He said this position has also been upheld by the law ministry and the nation's second-highest law offer, the solicitor general of India. "The oil ministry has moved a cabinet note seeking approval for the deal subject to Cairn India and its subsidiaries seeking a NOC from partner ONGC."

The issue may come up before the cabinet next week, says the report. The ministry has, however, completely withdrawn the precondition asking Cairn India to give up its legal rights on future disputes over its mainstay Rajasthan oilfield and abide by the government and oil regulator DGH's diktat.