Cairn-Vedanta deal: CCEA likely to defer decision

[bingogo]

Posted: Thu Jun 30 2011, 01:53 hrs New Delhi:


The Cairn-Vedanta deal, which is scheduled to come up for the Cabinet Committee on Economic Affairs (CCEA) approval on Thursday, may witness further deferment in decision. The possibility raises from the fact that the ministry of corporate affairs (MCA) today informed the petroleum ministry that it plans to take action against Vedanta subsidiary Sesa Goa for under-invoicing iron ore exports.

Vedanta recently acquired 18.5 per cent in Cairn India through Sesa Goa with 8 per cent bought through open offer and 10.5 per cent from Petronas.

MCA reply follows a complaint by BJP Member of Parliament Sumitra Mahajan to Finance Minister Pranab Mukherjee last month that Sesa Goa was being investigated by Serious Fraud Investigation Office (SFIO) for siphoning money and transferring to various group companies.

MCA told the petroleum ministry that SFIO report says that Vedanta, which bought Sesa Goa in 2007, indulged in under-invoicing. The under-invoicing was done between 2003 and 2010 and costed the national exchequer more than Rs 1,000 crore, it said. MCA said that a copy of the SFIO findings had been sent to Sesa Goa for comments more than month ago but since it had not responded, the ministry had decided to prosecute the board of directors of Sesa Goa after obtaining the legal opinion from the ministry of law & justice.



Former minister of state for petroleum Mahajan, who also raised the issue of Sebi prematurely allowing Sesa Goa to make the open offer, had requested Mukherjee that the deal be kept in abeyance till a complete enquiry and a final report is placed before Parliament.

Mukherjee forwarded Mahajan’s complaint on May 22 seeking petroleum ministry’s response. However, the ministry passed it on to MCA and the Department of Economic Affairs for comments, says a CCEA note. In the mean time, on May 27, the Group of Ministers took a view that the $9-billion share transfer from Cairn Energy to Vedanta could be approved only Cairn or its successor agree that royalty and cess on the Rajasthan oil fields to be cost recoverable.

As per GoM recommendation, Cairn or its successor would have to bear royalty and cess equal to their equity share in the Rajasthan block. ONGC, which holds 30 per cent in the field, currently pays the entire royalty.