India clears Cairn-Vedanta deal
Friday 01 July 2011
The government of India has conditionally cleared Vedanta Resources' plan to buy control of Cairn Energy's India unit, the Indian Oil Minister S Jaipal Reddy said yesterday.
Mr Reddy said the Indian cabinet had cleared the transaction, which will see Vedanta expand into the oil business by acquiring control of Cairn India, but with a rider that it would have to pay part of the royalties on the oil from the unit's fields in Rajasthan state.
The deal had been held up amid a dispute with state-backed ONGC, which owns a minority stake in the Cairn fields, but pays all the royalties. ONGC had argued that the Cairn-Vedanta deal should prompt a reassesment of that arrangement. Although Cairn and Vedanta opposed the move, Mr Reddy said that the royalty would be treated as a "cost recoverable" item.
The news comes just days after Cairn and Vedanta cut the price tag of the deal by more than $600m (£370m).
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