cairnvedantadeal_20110308

8/7/2019 cairnvedantadeal_20110308

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URGENT AND IMPORTANT

To

The Prime Minister of IndiaThe Minister of Petroleum and Gas

The Finance Minister

The Minister for Commerce and Industry

The Minister for Law and JusticeThe Chief Vigilance Commissioner ( Acting)

The Director of Central Bureau of Investigation

Respected Sirs,

First option of ONGC on Cairn Vedanta Deal

Loss of hundreds of billion dollars

.

The deal between Cairns and Vedanta relating to valuable oil fields handed over to

Cairns, in a joint venture with ONGC with vast oil reserves, needs public scrutiny.

ONGC has a right of first refusal according to the ex Chairman of ONGC which was alsoconfirmed by the Solicitor General..

The estimated reserves is said to be in the region of 6 billion barrels from the Barmer oil

field alone. This translates into a revenue of 600 billion dollars. It therefore does not

stand to reason as to why the oil reserves should be allowed by the government to be

transferred for around seven billion dollars to Vedanta when it has the right of first

option of purchase.

There are pending disputes relating to payment of royalty and cess presently paid by

ONGC and neither paid nor recovered as cost from Cairn. The excess liability ( to be

paid by Cairn ) of ONGC on royalty alone is to the tune of 12,000 crores on one oil

field .The deal also becomes cheaper to the extent that ONGC has to pay excess royalty.


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Somehow the original deal got structured in a manner by which the entire liability of

royalty and cess devolved on ONGC and not on Cairn. The matter needs to be

investigated and responsibility fixed..

It also needs to be pointed out that Vedanta is leveraging on the iron ore mineral assets of

SESA GOA in which it has a controlling stake to raise loans to finance the Cairn deal.

The iron ore reserves of Sesa Goa are worth two lakh crores and ironically is owned by

people of the country.

The company is leveraging on one natural asset, the ownership of which is with the

people of the country to buy another asset also owned by the people. Viva la crony

capitalism!.

Under the circumstances, it is the collective responsibility of all the Ministers to whom

the letter is addressed , including the CVC and the CBI that there is complete pre deal

signing transparency so that allegations of crony capitalism/ bribery,/sell out / economic

blunder are not leveled later on after the government approves the deal. The recent

financial scams have taught us that collective decision is no guarantee against corruption

or loot of public assets. Natural resources are covered by the doctrine of public trust as

held by the Supreme Court in RIL vs RNRL.

It may be noted that the deal is not a policy matter but involves arithmetic calculations to

determine as to whether it is profitable for the ONGC to exercise the right of first refusal.

The valuation report, oil reserves, price of oil, number of oil fields and the loss on royalty

and cess on the existing deal are quantities that have to be factored in. It is hoped that the

size of reserves and the price of oil will not be manipulated as was done at the time of

handing over discovered oil fields to Reliance.


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Hence, it is requested that the following should be disclosed to the nation in public

interest for the decision makers to establish their credibility that the deal is a bonafide

one.

1. The government should place in public domain all the documents relating to the

deal with Cairn ONGC and the deal between Vedanta and Cairn.

2. The government should state as to whether ONGC has pre emptive rights on the

deal.

3. The government should state that even if it does not have pre emptive rights as to

why it cannot buy the equity by matching the bid?

4. The government should disclose all the calculation as stated above relating to the

deal.The government should disclose the estimated reserves, the cost of extraction

etc from each of the field proposed to be sold.

5. The government should show as to why ONGC is not exercising the right of

option.

6. It should also disclose the clause by which ONGC is paying all the royalty and

cess and those involved in the negotiation of the deal.. Was the clause inserted

deliberately for benefit Cairn? If so then have those who conferred the largesse

been investigated?

7. The government should not clear the deal merely because Cairn has a deadline

and the British government has lobbied for it. The Hutch Vodafone was cleared in

a hurry, under similar dubious circumstances, to suit the need of the seller and the

tax of 12,000 crores was not collected and the violation of foreign investment cap

norms deliberately overlooked

8. If on economic consideration the deal is allowed to go through then is the capital

gains going to be taxed? If yes, then when?

9. It should be disclosed if the Vedanta group is borrowing money from

Indian/foreign bank based on the natural resources like iron ore, bauxite which

belong to the people of the country? How much money are the Indain banks

giving and the amount of security/guarantee provided by the Banks?

10. The confirmation that the Vedanta group was not among the suspects of having

paid bribes to Khoda for signing MOU for minerals.


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The letter has been deliberately addressed to all the authorities/ Ministers involved in

clearing the deal so that ignorance cannot be claimed later on, if the deal is found to be

tainted by grant of illegal largesse under section 13 (1) of the PCA. It has also been

addressed to the CVC and he CBI for obvious reasons. The trend of the past of fixing

accountability and doing post mortem has to be changed to preventing scams.

Unlike the 2G scam the loot of natural resources worth billions of dollars has yet to

capture the popular imagination. Unlike the 2g scam there is nothing notional about these

losses. The losses are for real. They are ongoing, recurrent and not one time losses.

The largest loot of natural resources ( like the blood diamonds of African states) is taking

place in the oil and the iron ore ( bauxite and manganese are also important ) sector.

These highly profitable ( NMDC has a gross profit of 80%) natural resources owned by

people of India have been gifted to corporate for a song. It is crony capitalism at its

worst and both the principle political parties are guilty of the betrayal of public trust for

political and personal gains

The letter is being endorsed to the President, Vice President and the Chief Justice of

India, to keep them informed about the pending decision of the decision makers

involving hundreds of billions of dollars worth of natural resources belonging to the

people of the country.

Yours faithfully

( A K Agrawal )

Documents

cairnvedantadeal_20110308