Oil ministry sets 11 preconditions for Vedanta-Cairn deal

New Delhi: The oil ministry is ready to give an "in-principle" approval for Vedanta Resources' $9.6 billion acquisition of Cairn India, provided the mining firm led by billionaire Anil Agarwal agrees to a set of 11 preconditions, reports PTI.

Earlier this month, the oil ministry had sought the law ministry's opinion on the legality of imposing certain preconditions on the stake sale, including Vedanta agreeing to withdraw pending lawsuits filed by Cairn with respect to payment of oil cess and accepting partner ONGC's pre-emption rights.

Sources said the ministry also wants Vedanta to agree to consider the royalty paid on crude oil produced from Cairn's mainstay Rajasthan block in the project cost and its profits calculated thereafter.

As per the production sharing contract (PSC), the operator is permitted to recover all project costs from the sale of oil or gas produced from a field before a mechanism for profit-sharing with the government comes into play.

State-owned Oil and Natural Gas Corporation (ONGC) holds a 30% stake in the Rajasthan block RJ-ON-90/1, but pays the royalty on the entire quantum of production, as it is the licencee of the block.

If the royalty paid by ONGC on behalf of Cairn is taken into consideration while calculating the project cost, this would lower the profits of the Scottish Energy firm, which does not pay royalty on its 70% share of the projected 12 million tonnes per annum output from the block.

Sources said the preconditions also include Vedanta guaranteeing that Cairn's technical capability will be undisturbed by the share transfer and the London-listed firm providing a fresh financial and performance guarantee.

The ministry also wants Vedanta to accept the government's decision on future exploration activities and expenditures as "final and binding", as well as unconditionally accept the government's position on issues that have been challenged by Cairn in courts.

Like royalty, Cairn believes the liability to pay cess of Rs2,500 per tonne on all crude oil produced from the Rajasthan block also rests on ONGC.

This position has been disputed by ONGC and the ministry, which say that cess is to be paid by the project partners in proportion to their shareholding and the matter is under arbitration, sources said.

The ministry said its "in-principle approval shall be further subject to ONGC's decision on the right of first refusal" on the Rajasthan block, as the solicitor general of India's view was that the transfer triggered ONGC's pre-emption rights.

The new oil minister, S Jaipal Reddy, had last week stated he will "not lose time" in deciding on giving consent to Vedanta buying Edinburgh-based Cairn Energy's majority stake in Cairn India.

"The issues relating to Cairn-Vedanta have legal implications. So some of them have been referred to the law ministry for clarification," Mr Reddy had stated.

Earlier this month, the Prime Minister's Office (PMO) had asked the oil ministry to decide whether to give consent to the deal by January-end, at least a month earlier than the deadline the ministry had set for itself when Murli Deora was at its helm.

"All fairness will be pressed into seriously (in deciding on the case). We will go by the rule book," Mr Reddy had said.

The PMO had to press for an early decision as the approval accorded to the deal by shareholders of Cairn and Vedanta was valid up to 15th April.

After acquiring Cairn Energy's stake, the London-listed firm's Indian unit, Sesa Goa, will make an open offer for an additional 20% stake to minority shareholders of Cairn India.

Sources said going by the February-end deadline set by oil secretary S Sundareshan for a decision on the acquisition, Vedanta would have been unable to close the deal by 15th April.

This is because the open offer, which can be made only after government consent to the deal, will have to remain open for subscription for at least 60 days.

If the government decision on the deal was to come by February-end (or in March, as was indicated by Mr Deora), the open offer could not have begun before the first week of March and it would have closed in end-April or early May, missing the 15th April deadline, they said.

After the PMO directive, Mr Sundareshan had on 10th January stated that his ministry will decide on giving approval to the deal by January-end or early February.

Cairn made formal applications for transfer of control in all 10 properties it has in India on 23rd November.

Mr Sundareshan had subsequently stated that his ministry "will need at two to two-and-half months to decide' on the application and indicated that the government would take a stance on the proposal by February-end.

ONGC, which holds interest in all three producing properties of Cairn and five out of its seven exploration acreages, claims that it has pre-emption, or the right of first refusal, on the deal.


Court issues bailable warrant against Subrato Roy

New Delhi: A Delhi court today issued a bailable warrant against Subrato Roy, chairman of the Sahara India Group, in a case of alleged cheating and forgery in a housing project launched by his company, reports PTI.

Chief metropolitan magistrate Vinod Yadav directed the Delhi police to execute the warrant against Mr Roy and four other company officials by 9th February.

The warrant was issued on a complaint filed by Neeraj Pandey who alleged that the company has not started the housing project despite getting a payment of Rs1 lakh in year 2003.

He has alleged that the company had launched the scheme Sahara Swarn Yojna for developing 217 townships all over the country including the NCR region.

In the complaint filed on 12 April 2009 it was alleged that despite the promise made in 2003, no progress was made for its project in the NCR region and the company after six years offered to return Rs1.58 lakh.

The complaint was lodged for the registering a first information report (FIR) for cheating and forgery against Mr Roy and others after police refused to lodge it.

"It is apparent that till date no allotment has been made to the complainant. It is also apparent that even the site of the township has not been disclosed to him giving rise to the presumption that despite collecting money from the proposed allottee the township has not been established," the court said.

Mr Pandey, who filed the complaint through advocate Ashutosh Bhardwaj, alleged that the company has collected Rs1 lakh each from 25,000 people from the NCR region but the project has not taken off till date.

The court after hearing the contention said there was enough prima facie evidence to take action against Mr Roy and other company officials.

"It is also apparent that all promises were held out to the general public through brochures/booklets which prima facie amounts to forging the documents. In my opinion there is prima facie enough material on record to proceed against them for offences punishable under Sections 420 (cheating), 468 (forgery), 506 (criminal intimidation) and 120B (conspiracy) of the IPC," the CMM said.

"There are further allegations that when the complainant approached this court and invoked criminal proceedings against Mr Roy and others, they used all possible measures to thwart this litigations, firstly by intimidating him and secondly by sending him the cheques of amount without he having asked for the same and thereafter invoking the arbitration clause, knowing fully well that the same was for civil litigation and not for criminal litigations," he said.


The Stuxnet connection: Will the UID be its next target?

Whether the super-worm was created in the US, Israel or China, we will never know. Nevertheless, India is still collaborating with companies from these countries without any background checks. Take for example, L-1 Identity Solutions, UIDAI’s partner for the Aadhaar project

Last week, the New York Times published an article that claimed that Stuxnet, an Internet worm, which infects the Windows operating system (OS), was a joint project of the US and Israel and its testing was done on nuclear centrifuges identical to those used by Iran at its Natanz nuke facility.

Even since Stuxnet made its appearance, it is alleged that the worm is mainly responsible for hampering Iran's nuke project. Some even claimed that the same worm was responsible for the launch failure of India's Geosynchronous Satellite Launch Vehicle (GSLV) rockets. However, the Indian Space Research Organisation (ISRO) has denied this claim.

Stuxnet was first discovered in July, but is confirmed to have existed at least one year prior and likely even before. The majority of infections were found in Iran. According to security company Symantec, Stuxnet represents the first of many milestones in malicious code history-it is the first to exploit four zero-day vulnerabilities, compromise two digital certificates, and inject code into industrial control systems and hide the code from the operator. The worm hit primarily inside Iran, Symantec reported, but in time also appeared in India, Indonesia and other countries.

"Stuxnet is of such great complexity-requiring significant resources to develop-that few attackers will be capable of producing a similar threat, to such an extent that we would not expect masses of threats of similar in sophistication to suddenly appear. However, Stuxnet has highlighted (that) direct-attack attempts on critical infrastructure are possible and not just (in) theory or movie plotlines," Symantec said in its latest report titled "W32.Stuxnet Dossier".

Last year in November, Mahmoud Ahmadinejad, president, Iran broke the country's silence about the worm's impact on its enrichment program, saying that a cyber attack had caused "minor problems with some of its centrifuges and fortunately their experts discovered it."

The most detailed portrait on the damage caused by Stuxnet came from the Institute for Science and International Security, a private group in Washington. In December, the group issued a lengthy report on Stuxnet, which said that Iran's P-1 machines at Natanz suffered a series of failures in 2009 that culminated in technicians taking 984 machines out of action.

The history of the P-1 machine is quite interesting and appears to be lifted directly from a James Bond movie. Early in 1970, the Netherlands designed a tall and thin machine for enriching uranium. A Pakistani metallurgist, Abdul Qadeer Khan, was working for the Dutch at that time. Later he stole the machine design and in 1976 fled to his homeland. There he built the machine, known as P-1 for Pakistan's first-generation centrifuge, which helped that country to make the bomb. Dr Khan, believed to have established an atomic black market, illegally sold the machine to Iran, Libya and North Korea.

Although Dr AQ Khan, often labelled as "Father of Pakistan's atomic program" is not a spy, there are others who after their first innings as superspy are turning entrepreneurs and selling machines and services to other countries. For example, our own Unique Identification Authority of India (UIDAI)-the 'de facto' agency assigned to tag all residents, has partnered with a company that is full is such 'retired' secret agents.

L-1 Identity Solutions, chosen by UIDAI to implement the core biometric identification system for the Aadhaar programme, has names associated with the Central Intelligence Agency (CIA) and other American defence organisations in its top management or as directors.

In 2004, George Tenet, ex-director of CIA, joined L-1 Identity Solutions as director on the board. L-1's chief executive Bob LaPenta, in 2006, had said, "You know, we're interested in the CIA, and we have George Tenet." Mr Tenet is also accused of being one of those who deliberately furnished false evidence to US diplomats in order to garner support for the US 'intervention' in Iraq, post 2001.

Over the years, particularly after taking some top-notch 'retired' intelligence and defence officials on board, L-1 Solutions has made rapid progress. According to an IT expert, L-1 and NADRA, the Pakistan unique identity agency, appears to have been created on the same business model.

"Staffed strongly by persons with intelligence (quasi-military) links, the major goals of both agencies are to do business with their respective governments, and they succeed to the extent that they have virtually no competition. And this is the company UIDAI has welcomed into India," said the expert.

You may ask, what does L-1 or UID have to do with Stuxnet? Read again, L-1 Identity Solutions has been chosen by UIDAI to implement the core biometric identification system for the Aadhaar programme. What if someone wants to implant the backdoor in the machines used for storing UID data? This kind of backdoor engineering would prove to be disaster in the waiting.

This ambitious and expensive project uses biometric information like fingerprints, IRIS scans and face photos to create a UID number. The authority has already started roping in fat-profit organisations as its partners, which will very likely result in the database being used for targeted marketing. (Read: Fat profit institutions continue to board UID bandwagon )

Last year, India's Department of Telecom (DoT) asked all telecom operators to get clearance from the government before importing telecom equipment due to security reasons. Later, the government allowed private telecom companies to import equipment from Chinese vendors only after meeting certain criteria with regard to national security.

The major concern for the Indian government was that telecom equipment from certain countries, including China, could contain spyware that would give intelligence agencies access to our country's telecoms networks. This type of spyware installed into a chip of equipment is called remote access Trojan or backdoor software.

The appearance of Stuxnet and the reported sabotage it has carried out in Iran is one of the best examples of spyware being used to usher in the new age war. Whether Stuxnet was created by the US or Israel or by China, we will never know for sure. However, what is important is we are blindly welcoming everyone into our homes and sharing all personal information without a simple background check.

Normally this should have rung an alarm bell. But it seems there has been no reaction, let alone any action from UIDAI or the government. So, what is the control over these databases and what is there to prevent any unauthorised use of this data?

A few days ago, Moneylife asked a couple of questions through email to internationally renowned security technologist and author Bruce Schneier whether there is any way or method to detect a backdoor in telecom equipment and whether the Indian authorities would be able to address privacy and security concerns related with the UID project. Mr Schneier's answer was in the negative. On detecting the backdoor, Mr Schneier, who is also the chief security technology officer of BT said, "Study the source code and chip layouts and hope for the best. So no, there is no guaranteed way to detect it."

No doubt, the UIDAI and its key officials including Nandan Nilekani are experts in IT, but we do not know if they posses any capabilities to check spyware installed in machines or reverse engineering. This leaves an open question, what if something like Stuxnet hits the UIDAI's ambitious project?

According to Symantec, the real-world implications of Stuxnet are beyond any threat it has seen in the past. "Despite the exciting challenge in reverse engineering Stuxnet and understanding its purpose, Stuxnet is the type of threat we hope to never see again," it concludes.



Sunil Shibad

6 years ago

I don’t know what earth is going on but we should do our homework. All of us. India is a laughing stock. And let me assure I am not a techie but I demand that Narayan Murthy, Azim Permji, and Nandan Nilekani to quit halluicinate we are a “technological superpower”..

Stuxnet and assorted impact finance, health , UID, defense, electricity , stockmakets and even commercial aircrafts (In 2008, the central computer at the Spanish airliner Spainair was hit by a virus introduced through a USB drive; the malware slowed down a machine responsible for monitoring airplane failures, which an investigative report later fingered as one factor in the cause of the deadliest air disaster in Spanish history. ) Talking to a computer security researcher about Stuxnet is like asking an art critic to describe the finer points of the Mona Lisa. The world's top cyber security minds are absolutely in awe. How did the worm's creators expect to get it inside some of the most secure installations in the world? After all, sensitive machines often operate behind an "air gap"—that is, their networks are physically separated from the Internet and other dangerous networks where viruses can roam freely. Getting anything inside one of these zones requires the complicity of an employee. That's exactly what Stuxnet got, because its authors designed the worm to piggyback on the perfect delivery system—the ubiquitous, innocent-looking USB flash drive, the planet's most efficient vector of viruses, worms, and other malware.

On the other hand, Chinese computers continue to wage an unrestrained cybernetic war against Google. “Operation Aurora” has caused the company to pull out of China entirely and seek protection from the National Security Administration.

The original target nuclear area is Bushehr, Iran.

Rajan Manchanda

6 years ago

Mr.Super Worm (stuxnet) can he hide for long ?

Check out the Super Woman Ms.Nira Radia tapes ( 5400 tapes !)

Or else wait for

Super Man Mr.Julian Assange WikiLeaks to make the disclosure.


6 years ago

This a stunning revelation.

visit my blog http://makemyinvestments.blogspot.com and http://ourownipl.blogspot.com


6 years ago

Pl forward your article to Nandan Nilekani of UID. Dont assume that they look at all angles. They usually dont and bureaucrats often are naive about 'white skin'!

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