Delhi High Court dismisses Cairn plea to ship Barmer oil

Under the PSC between Cairn, a Vedanta Group company, and state-run ONGC, the former could sell surplus crude oil only to government and its nominees.

By: ENS Economic Bureau | New Delhi | Published:October 19, 2016 1:54 am

The Delhi High Court on Tuesday dismissed Cairn India’s plea to export its share of surplus crude oil from its Barmer oilfield in Rajasthan, saying: “The plea is bereft of merits, stands dismissed.” However, the court added that the company could resort to dispute resolution mechanism under the production-sharing contract (PSC) to address the issue of export of surplus crude.

Under the PSC between Cairn, a Vedanta Group company, and state-run ONGC, the former could sell surplus crude oil only to government and its nominees. As per the PSC, the company can lay its hands on 70 per cent of crude produced from Barmer and the rest goes to the PSU.

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While Cairn argued that it should be allowed to export its surplus crude as private domestic refineries in India were not offering competitive prices with respect to the international market, the government had maintained that the domestic crude cannot be exported till India attained self sufficiency.

Cairn had contended that it was forced to sell to two private refineries — Reliance and Essar — at a loss since the prices were not internationally competitive.

Under the contract, the government or its nominee can pick up the company’s share of crude and what is not picked up could be sold to private players or exported, Cairn had claimed, adding that after the crude is sold, the government gets 70 per cent of the profit. It had claimed that as a result of selling excess crude to private domestic companies like Reliance and Essar, at rates lower than international prices, the government was losing about Rs 4.5 crore per day.

Additional solicitor general Tushar Mehta had told the HC that India had a total refining capacity of 223 MT, but as of now only 38 MT of crude oil was available, and thus it would not be in the interest of the country to export crude.

The HC has agreed with the decision of the empowered committee of secretaries denying permission to Cairn to export its share of crude oil, saying the reasons given by the panel “are legal, germane and valid grounds”.

“Consequently, attaining self sufficiency is a precursor to trigger the right of petitioner to seek permission to export the participatory interest or share of crude oil and condensate… Also, if government does not lift the entire share of petitioner, then petitioner has the right to seek compensation,” it said. FE