Anil Agarwal attacks 'cess' bias against Cairn

Vol 15, PW 26 (12 Jul 12) People & Policy

Cairn India chairman Anil Agarwal is blaming the government for a Rs10,000cr ($1.8bn) drop in the company’s market value since April this year.

In a letter to former finance minister Pranab Mukherjee, Agarwal says the government’s “discriminatory and unforeseen” decision not to include Cairn India in a list of companies exempt from an 80% hike in the ‘cess’ rate, “has had a materially adverse impact on the company’s market value.” Writing from the central London office of Vedanta Resources at 16 Berkeley Street, Agarwal attacks Mukherjee’s last budget as finance minister on April 20 in which the rate of ‘cess’ (tax) on a barrel of crude was increased by 80% from Rs2500 ($55) to Rs4500 ($81).

The Cairn chairman describes as unfair the government’s decision to exempt 26 pre-NELP oilfields from the ‘cess’ hike – but not Cairn India. “We are disappointed that the Rajasthan oilfields have not been included in this list,” writes Agarwal on May 12.

“Cairn India is now the only producing private sector company to be impacted by the increase in ‘cess’. Since the budget announcement, the company has lost nearly Rs10,000cr ($1.8bn) in market value.

” Agarwal accuses the government of breaking a promise to treat Cairn fairly after Vedanta dropped arbitration in London and accepted royalty as a “contract cost” in return for government approval for its acquisition of Cairn India. “After extensive discussions these conditions were ultimately accepted,” adds Agarwal.

“We would now request the government to ensure a consistent policy on the applicability of ‘cess’ on all producing oilfields under the PSC and will appreciate your support in resolving this anomaly which discriminates against Rajasthan oilfields.”