With the government of India reportedly sticking to September 15 as its deadline for bids to buy Air India (AI, Delhi International), Cairn Energy has said it will drop its efforts to find Indian state-owned assets it can seize in countries such as France and the United States.
Simon Thomson, Cairn's chief executive, told the Press Trust of India in an interview from London that the British oil and gas exploration firm would drop its demands within "a couple of days" of receiving a USD1 billion refund due to the termination of a retrospective tax law.
The company, which gave India its biggest on-land oil discovery, welcomed the recent legislation that axed a 2012 policy that gave India's Department of Revenue the power to charge capital gains tax retrospectively where ownership of assets in India had changed hands overseas. The offer to return funds to Cairn Energy that had been seized in 2014 following a corporate reorganisation in return for the energy firm dropping all charges against the government "is acceptable to us," Thomson said.
"Some of our core shareholders like BlackRock and Franklin Templeton [Investments] agree. Our view is supported by our core shareholders, that on balance it is better to accept and move on and be pragmatic rather than continue with something negative for all parties which could last for many years," he said.
Seeking to repair India's damaged reputation as an investment destination, the government passed new legislation that drops INR1.1 trillion rupees (USD14.9 billion) in outstanding claims against multinationals such as Vodafone, Sanofi, Anheuser-Busch InBev, and Cairn Energy.
Around INR8.1 billion (USD110 million) collected from companies under the now-scrapped tax law will now be refunded if the companies involved agree to drop outstanding litigation, including claims for interest and penalties.
"Once we get to final resolution, part of that resolution is us dropping everything in terms of litigation. We can do that within a very short period of time, just a matter of a couple of days or something. So we are preparing on the basis of getting this resolution quickly, all these cases being dropped, and putting all this behind us," Thomson said.
Cairn has had "a good, open, and transparent line of communications with the government of India" on finding a resolution to the controversy, he elaborated, adding: "Our aim was to get to a resolution, something which would be acceptable to our shareholders."
"We were pleased when the government of India made what we thought was a pretty bold move, in terms of the enactment of the legislation. The intention of the government, which we are obviously aligned with, is to get this resolved as quickly as possible. Hopefully, that means within the next few weeks. It's good not only for us and our shareholders but also importantly for India."
