In a setback to Cairn India, the Delhi High Court dismissed its plea for permission 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% of crude produced from Barmer and the rest goes to the PSU.
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% 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 R4.5 crore per day.
Additional solicitor general Tushar Mehta had told the HC that India had a total refining capacity of 223 million tonnes, but as of now only 38 million tonnes 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.
In a separate case pending before the HC, Cairn India has been at loggerheads with the government regarding extension of its PSC with ONGC for the Rajasthan oilfields. The HC has asked the government to take a final call on the issue and inform the court.