CAIRN Energy is facing fresh complications in India where the government appears to be playing hard ball in a long running tax dispute.
The Edinburgh-based oil and gas firm is seeking $1 billion compensation (£0.8bn) in India after being barred from selling the remaining holding in its former Cairn India (CIL) subsidiary in the country pending resolution of a dispute that started in 2014.
Cairn appeared to have made a significant advance in March when the Government of India said it could receive $53 million dividends due from CIL which is now part of Vedanta.
However, the company revealed yesterday that the Indian Income Tax Department had ordered Vedanta to pay any sums that were due to Cairn to the government.
The sums due to Cairn from Vedanta now total US$104m. This includes a further dividend of US$51m declared after Cairn India merged with Vedanta.
Reiterating its demand for $1bn damages, Cairn said it expects to be vindicated when the arbitration panel considering the case gives its verdict. Final hearings are scheduled for January.
The company said: “Cairn is seeking full restitution for Treaty breaches resulting from the expropriation of its investments in India in 2014, the attempts to enforce retrospective tax measures and the failure to treat the Company and its investments fairly and equitably.”
The case has been a costly irritation for the management team led by chief executive Simon Thomson.
He said in 2015 that Cairn had been forced to shed about 40 per cent of its workforce and to sell North Sea assets while the disagreement continued.
The company now has plenty of cash and debt in place. It wants to focus attention on a work programme which has been delivering good results off Africa and Scotland.
Cairn has made bumper finds in Senegal waters since Mr Thomson took charge in 2011. It is developing giant North Sea fields with Enquest and Premier Oil, which are due onstream in coming months.
Cairn India held the giant fields Cairn discovered in India under founder Sir Bill Gammell.
The Indian Government is seeking $1.6bn from Cairn. The retrospective tax claim concerns events leading up to the 2007 flotation of Cairn India. Cairn axed 90 jobs in 2014 under a reorganisation programme.
Cairn insists it has paid all taxes due.
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