India May Pay Up Partially To Resolve Long-Pending Cairn Tax Dispute: BQ Exclusive

A security guard stands in front of a sign featuring the Cairn India Ltd. logo in Mumbai. (Photographer: Adeel Halim/Bloomberg)

India May Pay Up Partially To Resolve Long-Pending Cairn Tax Dispute: BQ Exclusive

We are ready to pay, a senior government official said to BloombergQuint regarding the pending tax dispute with Cairn Energy Plc. This marks a shift in the government's position though it continues to pursue an appeal against the international arbitral award Cairn won.

In the six months since the award, both sides have attempted a negotiated settlement. The government, still holding on to its tax claim asked Cairn to settle under the "Vivad Se Vishwas" tax litigation settlement scheme. Cairn refused. It offered to invest some of the over $1.7 billion award in India if the government paid up. In May, it also filed a claim in a New York court to impound overseas assets of soon-to-be-privatised national carrier Air India as a proxy of the Indian government.

The Indian government has now asked Cairn for fresh options to settle the matter. Depending on the British company's response, the government will take a call on the future course of action, the official told BloombergQuint on condition of anonymity.

Against a tax claim of Rs 10,247 crore (Rs 22,000 crore, if interest and penalty is included), the Indian tax department had recovered Rs 7,600 crore ($1.2 billion) via sale of assets seized from Cairn and withheld tax refunds. The international tribunal ruled against the tax claim and directed the $1.2-billion be returned to Cairn along with interest and costs. This added up to $1.7 at the end of 2021.

The official indicated some of this may be paid to Cairn, but wouldn't share a number or timeline.

The government has collected some Rs 7,000 crore from them earlier in tax refunds etc., he reiterated. If it's a reasonable amount within that amount the government is ready to pay, he said.

The ball is now in Cairn's court—to come up with an acceptable offer.

However, the official said the government will not pay if the energy major quotes an amount higher than what the tax department had recovered earlier.

Emails sent to the Finance Ministry and Cairn Energy remain unanswered.

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