New Delhi: A crucial meeting to discuss government approval for Vedanta Resources' USD 9.6 billion acquisition of Cairn India today remained inconclusive and Oil Secretary S. Sundareshan will meet the chief executives of the two firms again tomorrow to thrash out their differences.
While Oil Secretary S. Sundareshan described the 90-minute deliberation as 'extremely constructive', Cairn Energy - which is selling most of its stake in its Indian unit to Vedanta - hoped to complete the transaction on schedule by April 15.
This was the first time the Oil Ministry met Edinburgh-based Cairn Energy Plc Chief Executive Bill Gammell, Cairn India CEO Rahul Dhir and Vedanta representatives M S Mehta (Group CEO) and Tarun Jain (CFO) together.
Cairn India brought its most vocal independent director, Omkar Goswami, purportedly to put pressure on the Oil Ministry to give approval without insisting on three out of the 11 preconditions it had set for according approval for the deal.
Sources said the two sides went over each of the 11 conditions, with Cairn/Vedanta explaining their point of view. The Oil Ministry, however, held its ground on the precondition that state-run Oil and Natural Gas Corp's (ONGC) royalty liability in Cairn India's mainstay Rajasthan block will have to be addressed before such approval.
The Rajasthan block, which gives Cairn India 90 per cent of its valuation, is a losing proposition for ONGC, as it has to pay 20 per cent royalty to the state government on the entire output from the field, even though its share of production is only 30 per cent.
Cairn India does not pay royalty on the crude and has even contested the payment of Rs 2,500 per tonne cess on its 70 per cent share.
"We had extremely constructive dialogue... We hope to move forward to a positive solution," Sundareshan told reporters.
Refusing to dwell on the deliberations at the meeting, he said 'various issues' concerning the deal were being discussed.
Describing the deliberations as 'constructive', Cairn Energy said, "Cairn and Vedanta continue to work with the government of India to complete the proposed transaction before April 15, 2011."
Sources said the government is prepared to give approval to the deal subject to Cairn/Vedanta meeting conditions like agreeing to ONGC's demand for recovering the Rs 14,000 crore royalty the state firm will have to pay on behalf of Cairn India from the sale of oil produced from Rajasthan fields.
Acceptance of the demand would impact Cairn India's valuation as its future profits will go down and the company says its minority shareholder interest will be compromised.