Obstinate customs stop Cairn and BG crude tankers

Vol 6, PW 3 (10 Apr 02) People & Policy

HARASSMENT IS second nature for Indian customs, as British Gas and Cairn Energy are discovering to their cost, leaving the oil ministry embarrassed and red in the face.

On 28th March zealous customs and excise field units offshore Andhra Pradesh andMumbai seized a Cairn crude oil tanker for Ravva and a BG tanker for Panna-Mukta for their (alleged) failure to pay the newly announced crude oil cess (tax) at Rs1, 800 per tonne ($37.5) announced in the last budget. Neither BG nor Cairn - protected by fiscal stability clauses in their PSCs - are liable to pay the balance Rs900 per tonne cess.

For its part the oil ministry admits it was slack in not issuing a "clarification note" and accepts some of the blame. "The timing of the action (over the Easter break) was suspicious," reveals a source.

"It was designed to harass us, no one was in office for the next three days." Cairn and BG made panic telephone calls to the homes of Shastri Bhawan officials, who were equally surprised and at a loss by the turn of events. A flurry of telephone calls and letters followed to the finance ministry, which remained unmoved.

Cairn stood firm and refused to pay, hinting that if the issue was not sorted out Ravva would shut down. So did BG, whose partner Reliance tried to leverage its influence in the corridors of power.

Finally the oil ministry convinced Cairn and BG to issue a security bond so the tankers could be released. To Shastri Bhawan's shock, customs officials refused this formula, citing it had no written instruction from the finance ministry.

Now we learn, customs want a bank guarantee of Rs24cr, which neither Cairn or BG are willing to pay. Worried oil officials admit this incident is sending "wrong signals" as India embarks on the third round of NELP.

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