Decision expected 'soon' on Cairn-Vedanta deal

4th April 2011, Comments 0 comments

A decision on the proposed sale of a stake held by Britain's Cairn Energy in its Indian unit to mining conglomerate Vedanta Resources is expected soon, oil secretary S. Sundareshan said Monday.

"The Cairn-Vedanta deal has been placed before the highest levels of the government. Hopefully a decision will be taken very soon," Sundareshan said.

The Hindu newspaper reported on its web site that the federal cabinet would discuss the sale on Wednesday.

London-listed Vedanta announced last August that it would buy up to 60 percent of Cairn India for $9.6 billion, adding to its assets, which already include aluminium, copper, iron ore and zinc mines.

But the sale has been beset by delays caused by bitter differences between Cairn and its Indian state-owned partner Oil and Natural Gas Corp (ONGC) over royalty payments.

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 a fairer sharing of the royalties before the government approves the sale.

Cairn India's biggest holding is the Mangala deposit in Rajasthan, the country's largest onshore oil field.

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.

Foreign investment is vital for India, which needs to fund a $1 trillion scheme over the next five years to overhaul its dilapidated ports, airports, highways and other infrastructure to boost economic growth.

Cairn, which originally hoped to have what would be one of India's biggest takeover deals wrapped up by last December, needs New Delhi's nod soon to complete the sale by April 15, when Vedanta's bid lapses.

Vedanta's founder, billionaire Anil Agarwal, who has declared he wants to make his company an "Indian natural resources champion," has said he is looking forward to a "positive outcome".

-- Dow Jones News Wires contributed to this article --

© 2011 AFP

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