India delays Cairn ruling once again

 
City A.M. Reporter
INDIA’S oil ministry has again delayed a decision on whether to allow British oil explorer Cairn to sell a majority stake in its Indian unit to Vedanta Resources.

Murli Deora, the country’s oil minister, said the decision would not be made before the end of India’s financial year in March.

“We have to move with caution. There are too many complications. We will decide by the end of this financial year,” he said yesterday.

Shri Sundareshan, the top bureaucrat in India’s oil ministry, had previously said a decision would be made in February.

Cairn investors had hoped the deal would close by the end of the year, but the government is still deciding whether to back it in the face of complaints from state-controlled ONGC, Cairn India’s partner in the massive Rajasthan oilfields.

ONGC would like the tax rules changed to reduce its tax burden as part of the deal.

Vedanta, which mines zinc, aluminium, copper and iron in India, hopes to use the Cairn stake to expand in the oil and gas market.

Cairn plans to use the proceeds of the sale to return billions of dollars to shareholders and to fund exploration in Greenland.

Cairn India’s main asset is a 70 per cent stake in the Rajasthan oil development project with an estimated 6.5bn barrels of oil and gas.

Cairn Energy last month cast doubt on the planned sale, but said it still hoped to seal the deal next year.

Cairn said there was no guarantee it would sell 40 to 51 per cent of its 62.4 per cent stake in Cairn India to London-listed Vedanta due to regulatory uncertainty.

Shares in the London-listed firm closed up 2.6 per cent at 414p.