Tough choice for Vedanta as GoM adds riders to Cairn deal

London-listed Vedanta Resources faces tough decision after a panel of ministers set stringent conditions for approving Cairn India deal even though after accepting the stipulations the nation's largest private sector oil producer will still remain a hugely profitable venture.

Vedanta will have to decide if it should continue to pay Rs 405 per share or USD 6.65 billion for buying 40 per cent stake in Cairn India from its Edinburgh-based parent Cairn Energy plc or a lower amount in view of Group of Minister's condition that royalty on all important Rajasthan oilfield will be cost recoverable. Cairn India doesn't pay royalty on its 70 per cent share of 175,000 barrels per day of oil output, but will now have to agree to deducting the royalties paid by state-owned ONGC from revenues earned from oil sale, lowering its profitability.