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GoM meet today to decide on Cairn deal

Special Correspondent

NEW DELHI: A crucial meeting of the Group of Ministers (GoM) headed by Union Finance Minister Pranab Mukherjee is scheduled for Friday to take a call on granting approval to the now controversial $9.6-billion Cairn-Vedanta deal with or without any pre-conditions.

The GoM will pick up the thread from the recently held meeting of the Cabinet Committee on Economic Affairs (CCEA) which had decided to set up a GoM to take a close look at the deal. However, due to the Assembly elections to five States, the GoM could not meet since then and this would be the first meeting of the ministerial group.

However, Petroleum Ministry insiders were of the view that the GoM is unlikely to arrive at any consensus on the issue as the latest opinion by Solicitor General of India Gopal Subramaniam had made things difficult to take a firm decision on the issue.

In a related development, it is learnt that Additional Secretary S. Bhargava and Joint Secretary (Exploration) D. N. Narasimha Raju in the Petroleum Ministry, who had been dealing with the subject in the past nine months, are on official tour abroad.

The Solicitor General of India had reaffirmed his earlier opinion that the government could impose pre-conditions such as asking Cairn or its successor to share cess and royalty with Oil and Natural Gas Corporation (ONGC) in the crucial Rajasthan block. “The government is not bound to grant consent ipso facto or mechanically,'' he felt in his opinion given to the Finance Ministry.

On his part, the Petroleum Ministry, led by its Minister Jaipal Reddy, has played safe by giving an alternative to ONGC's demand, which was originally made a month before the Cairn-Vedanta deal was announced in August last year.

The Law Ministry and the Planning Commission have backed, making cost-recovery of royalty a pre-condition for approval.

It is learnt that the Finance Ministry is in favour of giving consent without any pre-condition and taking appropriate decisions to protect ONGC's interests. However, the GoM will have to take a call on the issue of sidelining the legal opinion given by the Solicitor General of India.

ONGC owns a 30 per cent stake in Cairn India's mainstay Rajasthan block, but is liable to pay royalty on the entire output from the field. Cairn is also contesting its liability to pay Rs.2,500 a tonne cess on its 70 per cent share.

Cairn Energy, which wants to sell at least a 40 per cent stake in its Indian unit to Vedanta, and the London-listed mining group are opposed to making royalty cost-recoverable as it will lower the profitability of Cairn India.

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