Cairn, Vedanta, ONGC and the crude politics of OIL

The latest skeleton making its way into the governments cupboards is the mess they have been making with the ONGC-CAIRN-VEDANTA royalty issue. It has become painfully clear that Vedanta hadnt done a proper due diligence as the issue of royalty recovery was not spotted by them and Cairn was betting on the same not being spotted so that they could get a higher price for their shares!!

What interests me is that even after it has become painfully aware that the royalty is to be recovered from all the stakeholders Why is the government now suddenly saying that let us give the green signal for the takeover of Cairn AND that the issue of royalty can be settled later?

The cost of arbitration for such an issue can manage the mid day meal scheme of a whole district for a year!! Quite obviously this issue has to be resolved BEFORE any merger or takeover is sanctioned and more importantly the same cannot be done without the express consent of ONGC.

Of course one should also not lose sight of the fact that the price that Vedanta pays for Cairn will be different depending on the royalty issue. So why is the government in a tearing hurry to bless this deal when Vedanta can get a significantly lower price once the royalty issue is settled in ONGC's favour? (as expected)

SEBI is as usual snoring away in one corner while the shareholders of Sesa Goa, Sterlite and Vedanta fend for themselves.