Centre Can Ask 10% More Profit From Barmer Block To Extend Production Sharing Contract With Vedanta: High Court

The Delhi High Court Friday said the Centre can demand a 10 per cent higher share in the profit derived from oil produced by Vedanta from the Barmer oil field in Rajasthan to extend the production sharing contract (PSC) with the company for another 10 years. A bench of Chief Justice D N Patel and Justice Jyoti Singh said no embargo can be placed on the right of the government to extend the contract on terms which are at variance with the initial terms of the PSC, “so long as they are in public interest and subserve the purpose of maximising revenue generation”.

The court also said that Vedanta does not have the right to demand extension of the PSC on unilateral terms that suit its interest, overlooking the interest of the State, which is a trustee of the natural resources under a Constitutional mandate.

“For all the aforesaid reasons, we hold that there cannot be extension of the PSC unconditionally, on the same terms and conditions which were prevailing 25 years ago i.e. on May 15, 1995, the effective date,” the bench said. With these observations, the court set aside a single judge order of May 31, 2018 directing the government to extend the tenure of the contract in question for a period of 10 years, till 2030, on the same terms and conditions as existed on May 15, 1995, when the PSC was initially executed.

The May 31, 2018, order had come on Vedanta’s plea for extension of the PSC which the company and the Oil and Natural Gas Corporation (ONGC) have with the government to extract oil from the Barmer block in Rajasthan. ONGC had communicated its approval for extension of the PSC in July 2016, after which the Centre had assured the court it would positively take a decision by October of the same year.

However, later it had sought more time as it was framing a uniform policy with regard to all such PSCs. Vedanta had moved the court after its request to the government in 2009 to extend the PSC did not elicit any response. It had claimed that the delay in a decision by the government was preventing it from infusing further investment of over Rs 30,000 crore in the project.

In its plea before the single judge, Vedanta had said that the estimated recoverable assets in the block were about 1.2 billion barrels of oil equivalent, of which 466 million barrels are expected to be recovered beyond current PSC period till 2030. Besides, it was also producing natural gas from the block and supplying it to government companies, it claimed.