**Vedanta’s Demerger Faces Government Objections Over Financial Concerns**
The Ministry of Petroleum and Natural Gas has raised significant objections to Vedanta Ltd’s proposed demerger into five separate publicly listed companies, citing potential risks to the recovery of government dues. Key concerns include the company’s plan to secure foreign loans using national oil assets as collateral, as revealed by a source familiar with the government’s position.
Additionally, the ministry has criticized Vedanta for withholding $578 million in payments related to a production-sharing agreement for India’s largest onshore crude oil block in Rajasthan, which is managed by Vedanta’s subsidiary, Cairn Oil & Gas. Vedanta announced its intention to demerge into six distinct entities in September 2023, with a target completion date set for March 2025.
On Wednesday, the National Company Law Tribunal (NCLT) requested Vedanta to respond to the ministry’s objections within four weeks. The demerger process may face delays beyond September 2025 due to pending regulatory approvals, particularly from the tribunal. Other concerns raised by the ministry include the liquidity status of Malco Energy, which has revenue-sharing agreements for oil and natural gas with the Indian government. Malco is expected to be integrated into Vedanta Oil & Gas following the demerger.
During a hearing at the NCLT in Mumbai, the ministry presented its objections, but Vedanta’s legal arguments could not be addressed due to time constraints. The next hearing is scheduled for September 17. A Vedanta spokesperson stated that the company would refrain from commenting on the matter as it is currently sub-judice, but emphasized that the proposed demerger aims to unlock long-term value by establishing sector-focused, independent businesses.
To address the government’s concerns, Vedanta has proposed submitting an affidavit to release the pledge on national assets that were used to secure foreign debt amounting to ₹1,500-2,000 crore. However, the ministry has expressed dissatisfaction with this offer. Vedanta has also suggested providing corporate guarantees from Vedanta Ltd for the dues of Vedanta Oil & Gas post-demerger, but this proposal has also been rejected by the government.
In summary, Vedanta’s demerger plan is under scrutiny due to financial concerns raised by the Ministry of Petroleum and Natural Gas, which could impact the company’s future operations and obligations to the government.
**FAQ**
**What are the main concerns regarding Vedanta’s demerger?**
The primary concerns include the potential impact on government dues recovery, the use of national oil assets as collateral for foreign loans, and the withholding of significant payments related to production-sharing agreements.