New Delhi: The USD 9.6 billion transaction between Cairn and Vedanta Resources is not listed for the Cabinet meeting this week. The news has come amidst talks that Cairn may be asked to resubmit applications seeking government’s nod for its deal with Vedanta Resources without attaching any conditions.

"As of now, it is not listed on the agenda of the Cabinet meeting slated for tomorrow," an Oil Ministry source said.   

During the day, market regulator SEBI, had stated on its website that Vedanta group's open offer for additional 20 per cent stake in Cairn India has been cleared without government’s consent. But within an hour, it retracted saying the open offer is still under process.

Cairn India had on November 23, 2010 made conditional applications, which have been questioned following a Delhi High Court ruling. The move by Cairn came more than three months after its parent firm Cairn Energy announced the sale of its majority stake in the company to Vedanta.

The Delhi High Court had last week upheld the state's sovereignty on the grant of consent in case of "any material change in the status of the companies or their shareholding".

It used this ground to allow the government to terminate Canoro Resources' contract for the Amguri oilfield in Assam. The Canadian firm sold shares to Barbados-based MASS Financial Corp without seeking prior approval from the government.

Sources said Cairn, after repeated reminders, had on November 23 applied for the sale of a 51 per cent stake to Vedanta, but with a rider that government consent was not mandatory and that the corporate deal involving a share transfer does not trigger partner state-owned ONGC's preemption rights.

This is contrary to the Delhi High Court. The sources said that after the deal, Vedanta will have a 60 per cent stake in Cairn India, a material change in a firm that controls the nation's largest oilfield.

The Oil Ministry had opposed the conditional application. This was also cited in the draft note it sent to the Prime Minister's Office for inclusion in his reply to UK Prime Minister David Cameron's letter alleging delays in approval of the deal.

"The question before us is if we can apply different standards to Canoro and Cairn," the source said. "So far, no decision has been taken". Cairn's application stated, "No consent is required or contractually called for," and it was seeking the nod as a responsible "citizen" which fully respects sovereignty.

Sources said the watered down conditions for approval of the Cairn-Vedanta deal are likely to be considered by the Cabinet only next week.  The ministry has watered down its preconditions and has almost withdrawn its condition that Rs 21,802 crore in royalty and cess paid by ONGC on behalf of Cairn India from the Rajasthan oilfields should be equitably shared.

 "The Oil Ministry has given an alternative that it will continue to legally pursue equitable sharing of royalty and cess, but will not make it a precondition for approval of the deal," he said.

Cairn and Vedanta are opposed to the move as it would lower Cairn India's profitability.
 
Sources said all the Oil Ministry now wants Vedanta to make appropriate disclosures to market regulator SEBI when it makes an open offer for acquiring an additional 20 per cent
stake in Cairn India, as per takeover rules.

Comments on the note are likely to be received by next week and the matter may go to the Cabinet in the following week for consideration.

Though Cairn Energy and Vedanta have a timeline of April 15 to close the transaction, the deal will go through even if Cabinet was to give its nod by the month-end.

Once the government's nod is obtained, the two firms can approach their shareholders seeking an extension of the April 15 deadline, saying the conclusion now remains a mere formality.

Sources said that in all likelihood, the deal can be closed by May-end. The note states that Vedanta Resources had only "very recently" informed the ministry through a letter dated January 28 that the transaction needs to be closed by April 15.

(Agencies)