Mumbai : London-based oil major Cairn Energy’s board Tuesday voted in favour of accepting conditions laid out by the government for allowing sale of 40 percent of its stake in its Indian arm to Vedanta Resources.
“Two of the government of India conditions – Cess and Royalty payable – are currently with Cairn India shareholders for approval. Cairn has voted to accept these conditions,” said Cairn Energy in a statement to the London Stock Exchange.
Cairn India currently does not pay any royalty on its 70 percent interest in the Rajasthan oilfields. The royalty, as per the contract, is paid by the state-owned ONGC, which got a 30 percent stake in the 6.5 billion barrel field for no cost.
In late June, the Cabinet Committee on Economic Affairs (CCEA) gave its nod to the stake sale but with a rider that the royalty burden for the Rajasthan crude oil was to be shared by all stake holders and Cairn should withdraw all arbitration cases.
Till now, the Edinburgh-based firm had maintained that forcing its Indian unit to pay royalty and cess on its Mangala oilfield in Rajasthan was against the signed contract and would hurt minority shareholders’ interest.
The Mangala field currently produces 125,000 barrels of oil per day. One barrel equals 159 litres.
Cairn Energy also said that it had received $1.4 billion on July 26 from sale of 10 percent of the India arm’s equity and the second tranche of 30 percent would fetch it $4 billion.
“Cairn is encouraged the Vedanta transaction is moving towards completion. Following approval from the government of India, all parties are now working to satisfy the consents and conditions to complete the sale to Vedanta as soon as possible,” said Simon Thomson, chief executive, Cairn Energy PLC.
“The sale of Cairn’s 40 percent stake will allow a return of substantial funds to shareholders,” he added.