After procrastinating for months, the Oil Ministry has taken a watered-down note to the Cabinet for giving consent to London-listed mining group Vedanta Resources' $9.6 billion acquisition of Cairn India."We have sent out Cabinet note ... as to when it should be put up before Cabinet Committee on Economic Affairs depends on Cabinet Secretariat," said Oil Minister S Jaipal Reddy in New Delhi.
The ministry after incorporating comments on its draft note from ministries of finance and law circulated a final note for consideration of the CCEA.
"It (the issue) can be taken up anytime," Reddy said.
A CCEA meeting is scheduled for tomorrow but the approval for the Cairn-Vedanta deal is not listed on its agenda so far.
Reddy has watered down preconditions for giving approval to Cairn-Vedanta deal that was announced in August 2010 and has almost withdrawn the ministry's contention that Rs. 21,802 crore (Rs. 218.02 billion) in royalty and cess paid by ONGC on behalf of Cairn India on the Rajasthan oilfields should be equitably shared.
The Oil Ministry under previous minister Murli Deora, had conditioned the government nod to Cairn India agreeing to equitable sharing of royalty and paying its share of cess.
However, the note that was circulated after Reddy took over, the Ministry listed an alternative that it will continue to legally pursue equitable sharing of royalty and cess, but will not make it a precondition for approval of the deal.
"As a ministry, we are off the view that royalty should be treated as cost recoverable item. Whether it is to be pre-conditioned or not, it is another matter," Reddy said.
His cabinet note lists two alternatives. In the first, five preconditions are listed, instead of the 11 it had originally proposed to Cairn/Vedanta in January.
The five preconditions include royalty being made cost-recoverable, Cairn India withdrawing arbitration disputing its liability to pay cess, Cairn India obtaining partner ONGC's no-objection and Vedanta providing performance and financial guarantees.
As an alternative to the precondition of royalty and cess, the ministry has suggested that government shall pursue all legal recourse for establishing its rights under the Production Sharing Contract in the case of cess.
On royalty, it shall take appropriate decision to enforce the provisions of PSC to make royalty cost-recoverable.
Sources said it was unlikely that the Cabinet will go with the first option when an easier and least controversial option has been given in the second.
"We have given two options to the Cabinet," Reddy said.
"I cannot speculate on what the Cabinet will decide."
Reddy did not say if the Cabinet may asked Cairn India to make an unconditional application seeking government consent for the transaction.
