Conditions could kill Cairn-Vedanta deal: report

Cairn Energy has warned India that imposing conditions on the sale of the British firm's majority stake in its Indian unit to Vedanta could kill the deal, a report said Saturday. The energy exploration company has also told the Indian government that the deadline for sealing the transaction will not be stretched beyond the current extended deadline of May 20, according to the Indian Express newspaper.
Imposing conditions would "inevitably cause the proposed transaction to fail," Cairn Energy chief Bill Gammell said in a letter dated April 18, the newspaper said. The report came ahead of a meeting expected early next week of an Indian ministerial panel formed to advise the cabinet on whether to approve Cairn Energy's plan to sell its majority stake in Cairn India to London-based resources giant Vedanta.
Last August, Vedanta offered to buy up to a 60 percent stake in Cairn India in a deal expected to cost as much as $9.6 billion. But the sale has been held up by deep differences between Cairn and its Indian state-owned partner Oil and Natural Gas Corp (ONGC) over the payment of royalties involving India's biggest onshore oilfields.
ONGC gets just 30 percent of the output from Cairn's oilfields. But it pays royalties on 100 percent of the production under a "royalty holiday" scheme dating from the 1990s aimed at promoting private oil exploration in energy-hungry India. ONGC has been pushing for an equal share of the royalties before the government approves the sale.
The cabinet is split over whether the royalty row should be settled before or after the sale goes through. Vedanta has already reportedly expressed its inability to proceed with the deal if it is asked to share the royalty burden. The panel headed by Finance Minister Pranab Mukherjee which is expected to meet late Monday will send its recommendations to the cabinet, but no date has been set for a final decision.
The sale and the settlement of disputes between Cairn and ONGC are "two distinct issues" that should be settled following due process, Gammell was quoted as saying by the newspaper. Gammell added that uncertainty over the transaction "has resulted in the strategic development and businesses of all three of Cairn Energy, Cairn India and Vedanta essentially being frozen".