Cairn-Vedanta $9.6 billion deal suffers new blow
Resources giant Vedanta's $9.6 billion bid for the Indian unit of Britain's Cairn Energy suffered a new setback late Wednesday when it was referred to a ministerial panel for review.
"The cabinet committee on economic affairs, which was scheduled to discuss the deal on Wednesday, has decided to refer the matter to a group of ministers," oil minister Jaipal Reddy announced to reporters late Wednesday.
Finance Minister Pranab Mukherjee will head the group of ministers that will look at the deal, held up by a row over royalty payments involving India's biggest onshore oilfields that has led to discord within the cabinet.
The decision to refer the proposed sale to the ministerial panel came as a surprise as Indian media had reported that long-awaited approval for the deal was imminent.
London-listed Vedanta announced last August that it would buy up to 60 percent of Cairn India to add to its assets, which already include aluminium, copper, iron ore and zinc mines.
But the sale has been beset by difficulties caused by bitter differences between Cairn and its Indian state-owned partner Oil and Natural Gas Corp (ONGC) over the payment of royalties.
"The group of ministers will give its report shortly after it has examined the deal from all angles. We must understand there are several implications to this deal," said Finance Minister Mukherjee.
But he could give no date on when the panel would deliver its verdict.
ONGC receives 30 percent of the output from Cairn's oil fields but, pays royalties on 100 percent of the production under a "royalty holiday" scheme dating from the 1990s to promote oil exploration in energy-hungry India.
ONGC has been pushing for an equal sharing of the royalties before the government approves the sale.
The impasse has come at a bad time for India as foreign investment has slumped with investors worrying about a slew of corruption scandals that have shaken the government, including a suspected massive telecoms licensing fraud.
Britain's Cairn Energy chief Bill Gammell has called the sale a litmus test for foreign investors mulling putting their money into India and anxious to know that they can get their funds out when they wish.
© 2011 AFP