Vedanta's Contention Upheld in Arbitration Award over Rajasthan Oil Block Dispute

25 Aug 2023 , 11:20 AM

Vedanta Ltd, led by billionaire Anil Agarwal, announces its victory in the arbitration award regarding the Rajasthan oil block case. The arbitration award issued on August 23, 2023, has upheld Vedanta’s contention, according to the company’s disclosure to the stock exchanges.

The dispute concerns the government’s demand for an additional profit payout related to Director General of Hydrocarbon (DGH) audit exceptions. The demand pertains to allocating common development costs across development areas and other matters, which Vedanta asserts is not payable under the terms of the Production Sharing Contract (PCS) for the Rajasthan block.

Vedanta initiated the arbitration proceedings in response to the government’s request for a greater share of profit during the renewal of its license for the oil block in Rajasthan’s Barmer region. The original license for oil and gas exploration and production in the Barmer block expired on May 14, 2020.

The government offered a 10-year extension but sought a higher share of oil and gas, along with the resolution of a Rs 5,651 crore dispute over cost recovery. The government’s claim revolved around the reallocation of common costs among different fields in the block and the disallowance of pipeline-related expenses.

The dispute’s financial aspects were initially Rs 2,870 crore for the fiscal year 2016-17, which was later revised to Rs 3,613 crore until March 2018. An additional Rs 2,038 crore was included on April 28, 2022. Vedanta contested this demand before the arbitration panel, and its contentions have been vindicated in the arbitration award. The company is reviewing the award in detail and assessing its potential financial implications.

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