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The NOC will be given after Cairn Energy, its Indian arm Cairn India and the mining group sign a legally binding agreement accepting to share royalty and pay cess on the most important Rajasthan oilfields
New Delhi: State-owned explorer Oil and Natural Gas Corporation is likely to give its ‘no-objection certificate’ (NOC) to Cairn Energy Plc’s stake sale in its Indian unit to Vedanta Resources by the year-end, reports PTI quoting its chairman Sudhir Vasudeva.
“Our board had in principle given the NOC in September,” he told reporters here.
The NOC will be given after Cairn Energy, its Indian arm Cairn India and the mining group sign a legally binding agreement accepting to share royalty and pay cess on the most important Rajasthan oilfields.
The need for a legal document has arisen because Cairn India insisted on ONGC giving a no-objection to the Cairn-Vedanta deal before agreeing to twin conditions that the government had set for clearing the $9-billion deal.
“The agreement is in the final leg,” Mr Vasudeva said. “I am hopeful the NOC will be given before end of December.”
Cairn Energy, which holds a 52.1% stake in Cairn India, plans to sell a 30% stake to Vedanta. The government had in June, approved the deal subject to consent from ONGC, which is a partner in its mainstay Rajasthan block.
ONGC, for whom the Rajasthan project had been a losing proposition because it paid royalty not just on its 30% share but also on Cairn India’s 70% interest, has demanded an equitable sharing before the deal was cleared.
The mutual distrust has given rise to the need of a legal document where in Cairn will give in writing that it will pay Rs2,500 per tonne cess on its share of production from the all-important Rajasthan oilfields and also makes royalty payments cost-recoverable. ONGC will agree to issue NOC.
Cairn India does not pay any royalty on its 70% stake 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.
However, even before the $9.6 billion Cairn-Vedanta deal was announced in August last year, ONGC had demanded that like all other taxes, royalty should be added to the project costs, considering it as revenue earned from oil sales before profits were split between partners.
Cairn had opposed this as it would lower its profitability and had also initiated arbitration against the government contesting its liability to pay oil cess on its share. It believed that cess, like royalty, was also the liability of ONGC.
But Cairn Energy and Vedanta agreed to the conditions to get the deal cleared.
The EGoM felt that it would be safer to allow exports of one million tonnes, though the demand was for three million tonnes, the minister added. The stockholding limit is valid till the end of this month
New Delhi: The government on Tuesday allowed one million tonnes of sugar export and removed curbs on traders to hold stocks of the sweetener—a decision the industry said would help improve their cash flow and enable them to make timely payment to cane growers, reports PTI.
An Empowered Group of Ministers on Food (EGoM), headed by finance minister Pranab Mukherjee, approved exports as the country’s sugar production is expected to exceed the domestic demand by 3-4 million tonnes in the 2011-12 marketing year.
“The EGoM has approved one million tonnes of sugar export under the Open General License (OGL) scheme. In case of stock holding limits, it has been lifted on sugar,” food minister KV Thomas told reporters after the meeting here.
The EGoM felt that it would be safer to allow exports of one million tonnes, though the demand was for three million tonnes, the minister added. The stockholding limit is valid till the end of this month.
Asked if permitting exports could affect retail prices, Mr Thomas said: “Farmers want export. We have to balance the request of farmers as well as consumers.”
In the 2010-11 marketing year (October-September), the government had allowed 2.6 million tonnes of exports, out of which 1.5 million tonnes was through OGL in three tranches.
Sugar production in India—the world’s second largest producer and biggest consumer—is estimated at 25-26 million tonnes in this marketing year.
Although the industry has been demanding sugar export from the start of this marketing year, the food ministry was reluctant to give permission as it was fearing price rise during the festival season, when generally demand is higher.
Reacting to the decision, Indian Sugar Mills Association director general Abinash Verma said, “The exports will help in improving our cash flow. We will be able to make timely payment to farmers in this crushing season.”
Mr Verma said the mills would be able to earn a premium of Rs2 per kg on export of sugar at the current global rates.
Sugar mills are facing cash crunch as the Uttar Pradesh government has recently hiked the cane price by up to Rs40 to Rs250/quintal for this year. In Maharashtra, the factories would have to pay Rs220-Rs245 per quintal including harvesting and transportation charges.
The ex-factory price stands at Rs300-Rd310 per quintal in UP, which is almost equal to the cost of production.
Mr Verma noted that the lifting of stockholding limits makes sense as the country is all set to produce surplus sugar.
Besides sugar, the EGoM decided to remove stock holding limit on rice, though certain states like Tamil Nadu have requested to continue.
“We had decided two months back that we will lift the stock holding limit on sugar and rice once the festival season is over. Those states who want to continue with stock holding limit on rice, they can continue,” Mr Thomas said.
The panel of ministers has decided to allow 10,000 tonnes of non-basmati rice export to Horn of Africa—Kenya, Somalia and Djibouti—on diplomatic consideration, he said.
The minister said the EGoM approved exports of 21,200 tonnes of rice, 24,000 tonnes of wheat, 2,400 tonnes of edible oil, 12,00 tonnes of pulses and 1,600 tonne milk powder to Bhutan on an annual basis.
The EGoM ratified a proposal to allocate additional food grains of 23.68 lakh tonnes to 174 poorest and backward districts as per the orders of the Supreme Court and recommendation of the Wadhwa Committee.
The panel also approved to continue distribution of 35 kg of foodgrain at Rs2 per kg of wheat and Rs3 per kg of rice to 17,118 families affected by communal violence in Kandhamal district of Orissa.