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Government Gets 2 Months To Firm Up View On Cairn India’s Rajasthan Block Extension Plea

Cairn India’s original contract with ONGC expires in 2020.



The silhouette of contractors are seen working on an oil exploration facility (Photographer: Luke Sharrett/Bloomberg)
The silhouette of contractors are seen working on an oil exploration facility (Photographer: Luke Sharrett/Bloomberg)

The government on Monday sought more time from the Delhi High Court to arrive at a final decision on Cairn India's plea for extension of the production sharing contract (PSC) for the Barmer oil fields in Rajasthan.

State-run Oil and Natural Gas Corporation Ltd. (ONGC) had in July notified the ministry of petroleum and natural gas about its decision to extend the 25-year contract. The high court had thereafter given the Centre three months to firm up its view on the matter.

However, the Centre on Monday sought more time from the Delhi High Court, saying it is mulling a uniform policy to grant extensions to existing contracts for oil and gas fields.

In response, the court asked the Centre to decide on Cairn India's plea without linking it to the proposed final policy. The Centre has to submit its final decision by January 6.

ONGC has agreed to a 10-year extension of the contract with Cairn India after the original contract expires in 2020. The company’s counsel Shashi Prabhu had told the court in July that the public sector unit (PSU) had sent its approval for extension to the ministry of petroleum and natural gas.

In September, Cairn India’s counsel had argued that the company needs clarity on its extension plea, as it had already begun talks with international lenders to raise over Rs 30,000 crore which will be invested in the Rajasthan block – provided the licence is extended – and that investors cannot be kept in abeyance for long. Cairn India plans to invest in additional infrastructure after the original contract expires on 2020.

The government was supposed to take a decision in June but it’s September now and nine months since the high court’s order. The company supplies 27 percent of oil and gas required by India.
CA Sundaram, Cairn India’s Counsel to Delhi High Court

The government had earlier informed the court that the contract may not necessarily be extended on the same terms and conditions as the existing one.

Cairn India’s Rajasthan block comprises Mangala, Bhagyam, Aishwariya and Raageshwari oil fields.

The high court will hear the case on January 9, 2017 after the Centre submits its final decision.