Delhi HC Orders Extension of Cairn India Contract by 10 Years on Same Terms

The Delhi High Court has ordered extension of Cairn India Ltd.’s Rajasthan oil block contract for 10 years beyond 2020 on old terms and conditions, the company said in a regulatory filing. The court in an order directed the government to extend till 2030 the Production Sharing Contract (PSC) for Rajasthan block on the same terms and agreements when it was first entered into in 1995.

“The Delhi High Court whilst pronouncing the judgment also directed Government of India to formally communicate its decision extending the Rajasthan block PSC within two weeks,” Vedanta Ltd., formerly Cairn India, said in the filing.

“The 25-year contract for exploration and production of oil and gas from Barmer block RJ-ON-90/1 is due for renewal on May 14, 2020, but Cairn India has to, as per a new policy, apply for a 10-year extension. The government, had in March, last year approved a new policy for extension of PSCs that provided for an extension beyond the initial 25-year contract period only if companies operating the fields agree to increase the state’s share of profit by 10%. The Delhi High Court on May 31, 2018, allowed the writ petition filed by Vedanta Ltd., directing Government of India to extend the PSC for the Rajasthan block for a period of 10 years beyond the current contract term in accordance with Article 2.1 of the Production Sharing Contract on the same terms and conditions,” the filing added.

The company moved Delhi High Court as it felt that the May 1995 PSC for the block provided for an automatic 10-year extension on same commercial terms if there are oil and gas left to be produced. But the government had midway retrospectively changed fiscal terms. ONGC, which as a government nominee picked up 30% stake in the Rajasthan block in 1995, also was of the opinion that PSC provides for an extension on same terms. ONGC had first in May 2015, then again on at least two occasions in 2016, concurred with Cairn’s interpretation of the PSC for extension of the Rajasthan contract by 10 years on same terms. Vedanta had moved the court after its request to the government in 2009 to extend the PSC did not elicit any response. It had claimed that the delay in a decision by the government was preventing it from infusing further investment of over Rs. 30,000-crore in the project.