URGENT AND IMPORTANT

To
The Prime Minister of India
The Minister of Petroleum and Gas
The Finance Minister
The Minister for Commerce and Industry
The Minister for Law and Justice
The Chief Vigilance Commissioner ( Acting)
The Director of Central Bureau of Investigation

Respected Sirs,

First option of ONGC on Cairn Vedanta Deal

Loss of hundreds of billion dollars

.
The deal between Cairns and Vedanta relating to valuable oil fields handed over to
Cairns, in a joint venture with ONGC with vast oil reserves, needs public scrutiny.
ONGC has a right of first refusal according to the ex Chairman of ONGC which was also
confirmed by the Solicitor General..

The estimated reserves is said to be in the region of 6 billion barrels from the Barmer oil
field alone. This translates into a revenue of 600 billion dollars. It therefore does not
stand to reason as to why the oil reserves should be allowed by the government to be
transferred for around seven billion dollars to Vedanta when it has the right of first
option of purchase.

There are pending disputes relating to payment of royalty and cess presently paid by
ONGC and neither paid nor recovered as cost from Cairn. The excess liability ( to be
paid by Cairn ) of ONGC on royalty alone is to the tune of 12,000 crores on one oil
field .The deal also becomes cheaper to the extent that ONGC has to pay excess royalty.
Somehow the original deal got structured in a manner by which the entire liability of
royalty and cess devolved on ONGC and not on Cairn. The matter needs to be
investigated and responsibility fixed..

It also needs to be pointed out that Vedanta is leveraging on the iron ore mineral assets of
SESA GOA in which it has a controlling stake to raise loans to finance the Cairn deal.
The iron ore reserves of Sesa Goa are worth two lakh crores and ironically is owned by
people of the country.

The company is leveraging on one natural asset, the ownership of which is with the
people of the country to buy another asset also owned by the people. Viva la crony
capitalism!.

Under the circumstances, it is the collective responsibility of all the Ministers to whom
the letter is addressed , including the CVC and the CBI that there is complete pre deal
signing transparency so that allegations of crony capitalism/ bribery,/sell out / economic
blunder are not leveled later on after the government approves the deal. The recent
financial scams have taught us that collective decision is no guarantee against corruption
or loot of public assets. Natural resources are covered by the doctrine of public trust as
held by the Supreme Court in RIL vs RNRL.

It may be noted that the deal is not a policy matter but involves arithmetic calculations to
determine as to whether it is profitable for the ONGC to exercise the right of first refusal.
The valuation report, oil reserves, price of oil, number of oil fields and the loss on royalty
and cess on the existing deal are quantities that have to be factored in. It is hoped that the
size of reserves and the price of oil will not be manipulated as was done at the time of
handing over discovered oil fields to Reliance.
Hence, it is requested that the following should be disclosed to the nation in public
interest for the decision makers to establish their credibility that the deal is a bonafide
one.
1. The government should place in public domain all the documents relating to the
deal with Cairn ONGC and the deal between Vedanta and Cairn.
2. The government should state as to whether ONGC has pre emptive rights on the
deal.
3. The government should state that even if it does not have pre emptive rights as to
why it cannot buy the equity by matching the bid?
4. The government should disclose all the calculation as stated above relating to the
deal.The government should disclose the estimated reserves, the cost of extraction
etc from each of the field proposed to be sold.
5. The government should show as to why ONGC is not exercising the right of
option.
6. It should also disclose the clause by which ONGC is paying all the royalty and
cess and those involved in the negotiation of the deal.. Was the clause inserted
deliberately for benefit Cairn? If so then have those who conferred the largesse
been investigated?
7. The government should not clear the deal merely because Cairn has a deadline
and the British government has lobbied for it. The Hutch Vodafone was cleared in
a hurry, under similar dubious circumstances, to suit the need of the seller and the
tax of 12,000 crores was not collected and the violation of foreign investment cap
norms deliberately overlooked
8. If on economic consideration the deal is allowed to go through then is the capital
gains going to be taxed? If yes, then when?
9. It should be disclosed if the Vedanta group is borrowing money from
Indian/foreign bank based on the natural resources like iron ore, bauxite which
belong to the people of the country? How much money are the Indain banks
giving and the amount of security/guarantee provided by the Banks?
10. The confirmation that the Vedanta group was not among the suspects of having
paid bribes to Khoda for signing MOU for minerals.
The letter has been deliberately addressed to all the authorities/ Ministers involved in
clearing the deal so that ignorance cannot be claimed later on, if the deal is found to be
tainted by grant of illegal largesse under section 13 (1) of the PCA. It has also been
addressed to the CVC and he CBI for obvious reasons. The trend of the past of fixing
accountability and doing post mortem has to be changed to preventing scams.

Unlike the 2G scam the loot of natural resources worth billions of dollars has yet to
capture the popular imagination. Unlike the 2g scam there is nothing notional about these
losses. The losses are for real. They are ongoing, recurrent and not one time losses.

The largest loot of natural resources ( like the blood diamonds of African states) is taking
place in the oil and the iron ore ( bauxite and manganese are also important ) sector.
These highly profitable ( NMDC has a gross profit of 80%) natural resources owned by
people of India have been gifted to corporate for a song. It is crony capitalism at its
worst and both the principle political parties are guilty of the betrayal of public trust for
political and personal gains

The letter is being endorsed to the President, Vice President and the Chief Justice of
India, to keep them informed about the pending decision of the decision makers
involving hundreds of billions of dollars worth of natural resources belonging to the
people of the country.

Yours faithfully

( A K Agrawal )