In blow for Cairn, court rules no exporting of crude till India turns self-sufficient

In a blow to Cairn India Ltd, a plea of the UK-based Vedanta group company to export its share of crude oil from Barmer oil field in Rajasthan was on Tuesday rejected by the Delhi high court on the ground that domestic crude cannot be exported till India attained "self-sufficiency".

Justice Manmohan said that in the instant case, as no notice of India attaining self-sufficiency was given to Cairn, it can only claim compensation from the government for not picking up its share of crude from the oil field.

Under the production sharing contract (PSC) between Cairn and the Centre, the company gets 70 per cent of the crude produced from Barmer, with the rest going to the government.

The government or its nominee can pick up the company's share of crude and what is not picked up can be sold to private players or exported, Cairn had said during arguments.

The government, represented by Additional Solicitor General Tushar Mehta and the Centre's standing counsel Anurag Ahluwalia, had opposed Cairn's plea saying that an empowered committee had decided that export of the domestic crude oil cannot be allowed as it would be detrimental to India's energy security.

The court 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".

"In fact, the policy prohibiting export of crude oil has the concurrence of all the departments of Union of India and has nexus with the energy security of the country," the court noted in its judgement.

The empowered committee had denied Cairn's request for exporting its share of the crude oil, saying till India attained self-sufficiency, domestic crude cannot be exported as it would be detrimental to energy security of the country and also violate the provisions of the PSC.

"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.

The court said, "In the present case, absence of notice of India attaining self-sufficiency, petitioner can only claim compensation from respondent 2 (Union of India) under the dispute resolution mechanism provided under the PSC."

Referring to the provisions of the PSC, the court said that under the contract, Cairn "gets the right to lift and export its participatory interest or share of crude oil and condensate only when a notice regarding attainment of self-sufficiency by India is given by the government to the petitioner (company), and that too, subject to the government exercising the option to purchase the entire production in a particular year".

The court further said, "Only when the government has elected not to purchase, the petitioner shall be entitled to freely lift, sell and export any crude oil and condensate."

The court was also of the opinion that while a state trading enterprise (STE) like Indian Oil Corporation Ltd can import or export crude oil, any other person who intends to do so will have to apply to IOC.

"The ultimate decision to permit import or export is always a decision to be taken by the STE. Consequently, in the instant case, it is for IOC to allow or refuse permission for export on germane grounds," the court said.

It also rejected as "presumptuous" the argument of Cairn that not allowing it to export the excess crude was causing a huge loss to the exchequer, saying it was a "disputed question of fact".

The court, on August 10, had reserved the verdict in the matter in which the firm had argued that the export policy gave it the right to export.

During arguments, Additional Solicitor General Tushar Mehta, appearing for the ministry of petroleum and natural gas, had opposed Cairn's plea saying it cannot be permitted to export crude as "no unrefined petroleum product is allowed to be exported".

However, the counsel appearing for the firm had argued that no policy has been placed by the ministry before the court which says that crude cannot be exported.