The pre-conditions state that Vedanta has to "give an undertaking that the decision of the government would be final and binding" on all disputes on petroleum operations
New Delhi: In a move that is being seen as fresh arm-twisting, the oil ministry wants Vedanta Resources to surrender all its rights in past and future disputes and agree to several other stringent conditions if it wants government nod for acquiring majority stake in Cairn India, reports PTI.
Though the Prime Minister's Office (PMO) had earlier this month asked the ministry to decide on giving approvals to the $9.6-billion acquisition on merit, the oil ministry has slipped in 11 pre-conditions that are unlikely to be accepted by the London-listed firm.
Sources in know of the development said the ministry has proposed to give "in-principle approval" to the transaction, if Vedanta agrees to withdraw pending lawsuits and accepts ministry's diktat on future petroleum operations in Cairn's mainstay Rajasthan block.
The ministry's proposal is based on recommendations of the oil regulator Directorate General of Hydrocarbons (DGH), who is the custodian of the contracts oil companies sign with the government for oil and gas exploration and production.
The contracts, called Production Sharing Contract (PSC), provide for a dispute resolution mechanism but DGH wants Vedanta to surrender all its rights under the same in order to get approval for acquiring 40% to 51% stake in Cairn.
Sources said the pre-conditions, which have been referred to the law ministry to concurrence, state that Vedanta has to "give undertaking that the decision of the government would be final and binding" on all disputes on petroleum operations.
Further, it says the "government decisions/conditions (have to be) unconditionally accepted (by Vedanta) on the issues litigated by Cairn India and their associates".
The DGH on 7th January advised the oil ministry to ask Vedanta to accept its decision on disputes unconditionally even though Cairn had won one of the three issues under arbitration.
Sources said the ministry also wants Vedanta to agree to consider the royalty paid on crude oil produced from the Rajasthan block in the project cost and its profits calculated thereafter.
As per PSC, a company is permitted to recover all project costs from the sale of oil or gas produced from a field before calculating profits for itself and the government.
State-owned Oil and Natural Gas Corporation (ONGC) holds a 30% stake in 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.
According to PSC, the government consent in case of transfer of stake "shall not be unreasonably withheld" provided the buying company has sufficient financial standing and technical competence and is willing to guarantee them; is not incorporated in a country with which India has restricted trade or business; and, is willing to comply with any "reasonable conditions" necessary to ensure the contractual obligations.
Earlier this month, the 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.
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, 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, the open offer could not have begun before the first week of March and it would have closed in April-end or early May, missing the 15th April deadline, they said.
The UID project which is being rolled out with much fanfare by the government has innumerable pitfalls. Here are a few of them
Aadhaar with its biometrics and the ability to facilitate convergence of information-bona fide or otherwise-has the potential to compromise privacy and put people in trouble.
When such privacy concerns are raised, the oft-repeated rhetoric among the educated middle class is: "I am a law-abiding citizen and I do not have much to hide and fear. So, why should I be concerned with my personal data, including biometrics, being stored under the Aadhaar project, especially if it can make my life convenient?"
Well, if you are one of those who thought likewise, here are a few plausible ways in which you could be in trouble, thanks to Aadhaar and its indiscriminate use in the not too distant a future.
Scenario 1: Techie tries to change his job…
Ram is an upwardly-mobile young techie who is proud of his status. He is in love with the digital world; not bothered too much about issues around privacy. He is active on most of the social networking sites. He is proud of his connectedness. He has been the first one to get Aadhaar; he felt it would make his day-to-day transactions a lot more hassle-free. He has submitted his Aadhaar ID to all his previous employers, since it afforded him some additional benefits and privileges.
Recently, he has got a call from an MNC promising him an overseas assignment. He is excited about the opportunity. He has had a successful technical round. However, to his dismay, he is rejected after the HR round.
Trying to find the reason, he contacts an acquaintance in the company. To his surprise, he comes to know that the culprit is Aadhaar. A background check using Aadhaar by a company engaged by the MNC has revealed his problems with his boss in one of the companies he had worked for a long time back. He is not given a chance to explain himself but is presumed troublesome and rejected. He curses himself for being overzealous in his usage of Aadhaar.
Scenario 2: Sham tries to buy Medical Insurance...
Though Aadhaar was optional in the beginning, most of the clinics and hospitals have started insisting on it citing identity reasons. Sham is a middle-aged IT manager who has seen the convenience of using digital identity cards in his office. It is logical for him to think that using Aadhaar would prevent any misplaced identity. He does not think twice when someone asks him for Aadhaar.
Over the past few years, given the stress of his job, he has had episodes of "High Blood Pressure", treated occasionally at a few local clinics. In all those clinics he has unwittingly used Aadhaar. His doctors have told him that there is nothing chronic or serious about his occasional high BP. He has been able to manage his condition with minor lifestyle changes.
Now that he is approaching middle age, he decides to take out a medical insurance cover for himself. Most of the insurance companies have started insisting on Aadhaar for enrollment. After completing all the required formalities, he gets his insurance policy. He is puzzled to find that he has been denied insurance coverage for 'heart ailments'. He versifies that his BP, ECG and other conditions were normal during the prescreening test. On further questioning, he is told that he has a preexisting high BP condition. The culprit - Aadhaar!
The insurance company has done a background search on him using his Aadhaar ID and found out that he had taken some medicine for high BP sometime back in the past, though he is no longer on any medication. His argument that he has no chronic heart condition goes in vain.
Scenario 3: Saralamma becomes a suspect in a crime she did not commit…
Saralamma is a retired school teacher; very law-abiding. As soon as Aadhaar is rolled out, she is the first to get one. Someone has told her that her pension collection and bank transactions would be a lot easier with Aadhaar. She is not the one who is too concerned about what data is being collected; most of which she does not understand anyway.
Recently, she has received some arrears. She has decided to buy some silverware for her only daughter. She has checked out a specific set, but decides not to buy, as the cost is beyond her budget. After a few days, to her surprise, she gets a call from a security agency. There is a theft at the same jewelry shop she had visited. One of the items in the set that she had looked at is stolen. As part of the investigation, fingerprints are collected from items in and around the set. They are run against the biometrics stored by the UIDAI managing Aadhaar.
Alas, one of the fingerprints on the silverware matches that of Saralamma. She is asked to explain as to why she should not be considered a suspect. Saralamma is aghast as she does not understand how she got linked to the crime she did not commit!
Scenario 4: John loses money on a transaction he did not make…
John runs a travel business. He maintains his account with a cooperative bank which has signed up with Aadhaar for complete authentication services. In addition to the account number, he is required to give his Aadhaar number and fingerprints (biometrics) to complete any transaction.
One of his assistants has his eye on this account. He has found out that if he could capture the fingerprints of his boss, he could have fakes made to defraud the system. He transfers the drinking glass which has his boss' fingerprints to one of the petty shops which have recently sprung up to create fake fingerprints using digital scans, illegally.
With the dummy fingerprints of his boss in hand, he successfully withdraws the money. When John gets his monthly transaction report, he is shocked to find a huge withdrawal. When he questions his bank, he is told the Aadhaar-based biometrics has confirmed his identity and there is not much they can do about it!
Scenario 5: Ajay's son is denied admission to school …
Ajay has lived most of his life in the US. He has relocated back to India a couple of years back. He admits his son to one of the pre-schools. As part of the admission process he is asked for his son's Aadhaar; it has become more or less compulsory to monitor the progress of the child. Unfortunately, Ajay's son has some minor developmental disability. His pre-school documents this fact against his son's Aadhaar.
Now that his son is six years old, Ajay is desperately looking for a school for his son. He can even afford admission to any of the newly started international schools. To his surprise, he finds most of the schools denying admission. On investigation, he finds that the unique identity provided by Aadhaar is the cause. A background checking agency, employed by the schools, has done a search based on the Aadhaar ID and discovered that his son has a mild development disorder. Given that information, none of the schools want to take a chance!
The above examples are just a small sample of the scenarios that are very plausible. Though Aadhaar is currently optional, it is apparent that overtime it would be mandatory. Even if some of the scenarios depicted above can be avoided with stronger privacy laws, in a country where enforcement is lax, one wonders whether such misuses can be completely prevented.
Vulnerability of securely-stored digital information to theft has been exposed by recent leaks that have surfaced both nationally and internationally. As someone has commented, a safe digital record is an oxymoron. Some of the recent experiments have amply demonstrated how biometric fingerprints can be duplicated using technologies that are almost homemade. If you are still skeptical, read Arthur Conan Doyle's Sherlock Holmes's story, The Adventure of the Norwood Builder.
(Ramdass Keshavamurthy is a Bengaluru-based Technology Consultant)
SBI Mutual Fund’s new issue opens on 28th January and closes on 31st January
SBI Mutual Fund has launched SBI Debt Fund Series-90 Days-39, a close-ended income scheme.
The investment objective of the scheme is to provide regular income, liquidity and returns to the investors through investments in a portfolio comprising of debt instruments such as government securities, PSU & corporate bonds and money market instruments maturing on or before the maturity of the scheme.
The new issue opens on 28th January and closes on 31st January. The minimum investment amount is Rs5,000.