Centre moves Delhi HC challenging foreign arbitration award to Vedanta Ltd

The Centre on Thursday moved a petition in the Delhi High Court challenging a foreign arbitration award that Anil Agarwal’s company Vedanta Ltd won against the former’s demand for a higher payout from its Rajasthan oil and gas fields. The government in its petition said that the award is in conflict with the public policy of India.

The government claimed that the total short-paid GoI Profit Petroleum was Rs 9,545 crore ($1,162 million) up to May 14, 2020. This amount was about 70% of the total dues, excluding interest.

The dispute between the Directorate of Hydrocarbons and Vedanta and Cairn arose on account of incorrect cost recovery and non-allocation of common costs, having a huge adverse financial implication on the Profit Oil/Gas payable to the government, the petition stated as reported by the Economic Times.

In August last year, Vedanta Ltd won the arbitration against a demand for a higher payout from its prolific Rajasthan oil and gas fields after disallowance of Rs 9,545 crore (USD 1.16 billion) in certain costs incurred, the company said.

The government had sought additional profit petroleum (or its share from the oil and gas fields) after it reallocated certain costs between the fields in the block and disallowed a portion of the cost incurred on laying a pipeline to evacuate oil produced from the Rajasthan block.

As per the contract, companies are allowed to recover all costs incurred before splitting profit in a predetermined ratio with the government. If a certain portion of cost is disallowed, it would result in higher profits and a resultant higher share to the government. Vedanta had challenged such a demand before an arbitration tribunal.

“The company has received an arbitration award dated August 23, 2023… upholding the contention of the company that additional profit petroleum, on account of Director General of Hydrocarbon (DGH) audit exceptions in relation to allocation of common development costs across Development Areas and certain other matters, is not payable as per terms of the Production Sharing Contract for Rajasthan Block,” Vedanta Ltd said in a stock exchange filing last year.