After Cairn India's board agrees to make royalty cost-recoverable and pay cess on oil produced from the Rajasthan fields, it will write to its partner, state-owned Oil and Natural Gas Corporation (ONGC), for consent for the Vedanta transaction
New Delhi: The Cairn India board of directors may tomorrow concede to pay royalty and cess on its mainstay Rajasthan oilfields after parent firm Cairn Energy did a u-turn and accepted riders imposed by the government to clear its over $6 billion stake sale to Vedanta Resources, reports PTI.
The board of Cairn India, which had in February opposed changes in the Rajasthan contract making it liable to pay royalty and a Rs2,500 per tonne cess, will meet on Wednesday, following which the results of a shareholder vote called by Cairn Energy on the twin riders will be out, sources privy to the development said.
Cairn Energy, which owns a 52.11% stake in Cairn India, has voted to accept the two government conditions.
Vedanta, which has already bought a 10% stake in the company from Cairn Energy and another 18.5% from Petronas of Malaysia and other minority shareholders, has also voted for acceptance of the conditions.
Sources said Cairn Energy chairman Bill Gammell arrived here today to chair the Cairn India board meeting. Mr Gammell had last month skipped a Cairn India shareholders' meet, apparently to escape uncomfortable questions on the change of position.
After Cairn India's board agrees to make royalty cost-recoverable and pay cess on oil produced from the Rajasthan fields, it will write to its partner, state-owned Oil and Natural Gas Corporation (ONGC), for consent for the Vedanta transaction.
The ONGC board may consider waiving its pre-emption or right of first refusal (ROFR) and give Cairn a no-objection certificate to conclude the deal at its board meeting on 27th September.
Cairn Energy, which is selling a 40% stake in its Indian unit to Vedanta, had previously said it would rather call off the deal than force Cairn India to accept the government's conditions.
Minority shareholders at Cairn India's AGM in Mumbai last month had booed Cairn Energy for changing tack on the issue of royalty and cess to get $6.02 billion from the stake sale to Vedanta.
Cairn India had on 26th July stated that its April-June quarter net profit would halve to Rs1,435 crore if it was asked to share royalty on the Rajasthan crude oil.
The company currently does not pay any royalty on its 70% interest in the Rajasthan fields. Royalty, as per the contract, is paid by state-owned ONGC, which got a 30% stake in the 6.5 billion barrel field for free.
The Cabinet Committee on Economic Affairs (CCEA) on 27th June gave consent to the Cairn-Vedanta deal, subject to Cairn or its successor agreeing to charge or deduct the royalty paid by ONGC from revenues earned from the sale of oil before the profits are split between partners.
Also, Cairn India must pay a Rs2,500 per tonne cess on its 70% share of oil production. Till recently, Cairn had maintained that cess, like royalty, is a liability of ONGC and had initiated arbitration against the government over being forced to pay cess.
Cairn Energy's request for the twin government conditions to be voted on by shareholders is being done through a postal ballot.
Sources said the results of the postal ballot will be announced tomorrow afternoon, after which Cairn India's board of directors will meet.
Cairn Energy is selling a 40% stake in Cairn India in two tranches. The first tranche of 10% was completed in July and the second of 30% will be done after final government approval for the deal.
Since the Cairn-Vedanta deal was announced in August last year, Cairn India has been opposed to making royalty payments recoverable from the sale of oil and the company being made liable to pay a Rs2,500 per tonne cess, as this was not in line with the Production Sharing Contract (PSC).
A change in the contract was neither in the interest of the company, nor its minority shareholders, it has maintained.
Last August, Vedanta proposed buying a 51%-60% stake in oil and gas explorer Cairn India for up to $9.6 billion in cash, but the deal has been delayed awaiting government and regulatory approvals.
A Group of Ministers (GoM) headed by finance minister Pranab Mukherjee had recommended to Cabinet that the deal should be approved if Cairn or its successor agreed to royalty being added to the project cost and recovered from oil sales, as well as agreeing to pay its share of oil cess.
Days before the CCEA accepted the GoM recommendation and gave conditional approval, Cairn Energy lowered the price it was demanding from Vedanta to make up for the reduced profitability due to acceptance of the preconditions.
It also removed a non-compete provision from the deal and the related non-compete fee of Rs50 per share.
Vedanta's total payment for a 40% stake in Cairn India, at the reduced price of Rs355 per share, will now be $6.02 billion, instead of the earlier announced $6.84 billion.
Former power and finance secretary EAS Sarma says no action taken by Centre or Andhra Pradesh government on fraudulent report
Former union power and finance secretary EAS Sarma has threatened to go to court against the central and the Andhra Pradesh governments as well as Lohitha Lifesciences company for alleged multiple violations of environment laws.
"I hereby give notice of 60 days, under Section 19(b) of Environment Protection Act, 1986, of my intention to file a complaint in the court against the concerned regulatory authorities at the Centre and in the State of Andhra Pradesh, as well as the (pharma) company for violation of provisions of the Environment Protection Act of 1986 and the Rules and Regulations issued thereunder," Mr Sarma wrote in his letter to government officials, copies of which have also been circulated to environmental activists and citizens.
Moneylife recently reported how Lohitha Lifesciences had submitted an allegedly fraudulent environment impact assessment (EIA) report. (Read, "Companies procuring false environment impact reports, ministry overlooks fraud, says former top bureaucrat".) Sections of the EIA report submitted by Lohitha have apparently been blindly copied from another report by a sponge iron factory. But neither the Centre nor the state environmental authorities have taken any action in this case.
Lohitha is also said to have illegally taken up construction of its bulk drug unit in Visakhapatnam district without obtaining environmental clearance. Even a public hearing on the EIA report has not been organised, Mr Sarma said. He has alleged that this serious violation has been overlooked by the central and state ministries and the pollution control board which makes them a party to the wrongdoing.
"None of the agencies, viz. Ministry of Environment and Forests, the state government and AP Pollution Control Board, (APPCB) has ensured cumulative EIA for the project taking into account the total pollution load in the area and the implications of the incremental pollution caused by the project," Mr Sarma says.
The area where Lohitha's new unit is coming up already has a number of industrial units and the new unit will add toxic waste to the environment. "The toxic waste from the unit is proposed to be transferred to Ramky's Coastal Waste Management Unit at Parawada in Visakhapatnam. The performance of that unit has been unsatisfactory as brought out by the Dave Committee appointed by APPCB a couple of years ago," Mr Sarma says.
He said that the instances of environmental violations by Lohitha and other pharmaceutical companies have been brought to the notice of the state and Central ministries, but to no avail.
So far in the current fiscal, the government has been able to mop up just over Rs1,100 crore by offloading stake in Power Finance Corporation (PFC), as against the target of Rs40,000 crore by March end
New Delhi: Unfazed by current volatility in stock markets, the finance ministry today said the government will be able to raise Rs40,000 crore from sale of equity in state-owned companies this fiscal, reports PTI.
"We hope that we would be able to meet the disinvestment target," Department of Economic Affairs secretary R Gopalan told reporters on the sidelines of a CII event.
So far in the current fiscal, the government has been able to mop up just over Rs1,100 crore by offloading stake in Power Finance Corporation (PFC), as against the target of Rs40,000 crore by March end.
Over the past few months, the stock markets have been going through a rough patch on account of the global economic downturn as well as a host of domestic concerns including high inflation and rising interest rates.
The BSE benchmark index, Sensex, tumbled 2.17% yesterday to close at 16,501 points after the latest data showed that the industrial production growth fell to 21-month low of 3.3% in July.
Last fiscal, the government had raised Rs22,763 crore from sale of equity in public sector enterprises against a target of Rs40,000 crore. It offloaded equity in SJVN, Engineers India, Coal India, Power Grid and Shipping Corporation of India.
The government has already approved disinvestment in ONGC, SAIL, Hindustan Copper (HCL) and National Building and Construction Corporation (NBCC).
However, volatile stock markets have forced it to delay the formal process of selling stake in the PSUs, even as almost six months of the current fiscal are over.
Mr Gopalan also said that a meeting would be held later this month to look at the issue of raising the limit on external commercial borrowing (ECB) by companies.
"There is a meeting (to review ECB limit) at the end of the month," he said.
The high-level coordination committee (HLC) on commercial borrowings is likely to raise the overall limit of ECBs from $30 billion currently at its meeting on 15th September.
Hike in overall ECB limit, which was last increased in May, will help corporates to borrow more funds from overseas markets.
Meanwhile, at a meeting with finance minister Pranab Mukherjee on 1st August, industry leaders had demanded an increase in the ECB limit to help them tide over the problems on account of rising interest rates at home.
The current high interest rate regime, aimed at checking inflation, has made it very difficult for India Inc to borrow from banks, they had pleaded with the government.
Borrowing costs for corporates have gone up substantially as a consequence of the Reserve Bank of India's (RBI) hawkish monetary policy stance to tame stubbornly high inflation.
The RBI has raised short-term key interest rates 11 times since March, 2010.
In May this year, the government had raised the overall limit for ECBs substantially to $30 billion from $20 billion.
Mr Gopalan also said that a meeting would be held on 3rd October to review the government's borrowing plan for the second half of the current fiscal.