Cairn, Vedanta extend deadline for India deal by a month
07 April 2011
Cairn Energy extended the deadline for the $9.6-billion acquisition of its India subsidiary by Vedanta Resources by more than a month on Thursday, a day after the Indian government referred the controversial deal to a group of ministers.
The cabinet committee on economic affairs on Wednesday referred the contentious deal to a group of ministers to be headed by finance minister Pranab Mukherjee, following differences over the approval for the deal.
Vedanta Resources, owned by UK-based, Indian-origin businessman, Anil Agarwal, announced in August plans to acquire a minimum of 40-per cent stake (and a maximum of 51 per cent) in Cairn India Ltd, from Edinburgh-headquartered energy major Cairn Energy. The two groups set a deadline of 15 April to complete the deal.
However, Oil and Natural Gas Corporation (ONGC), a public sector energy behemoth, which has a 30-per cent stake in Cairn's Rajasthan fields, raised objections.
The company, which pays 100-per cent royalties on the oil – despite owning a 30 per cent stake – wanted its share of royalty to be brought down.
As part of its move to attract international oil majors to explore for oil fields in the country, The Indian government had come out with the policy of 'royalty holiday.' Cairn and Vedanta are opposed to the change in the royalty structure as it would impact valuations. The Indian petroleum ministry, however, has been backing ONGC and wants a change in the royalty structure.