Vedanta jumps after winning arbitration in $1.1-bn cost-disallowance case

Shares of Vedanta Limited gained over 2 percent in the morning trade on August 28 after the company won an arbitration against the government demand for a higher share of profits from the company’s oil and gas field in Rajasthan, in a Rs 9,545-crore cost disallowance case.

At 10:43 am, Vedanta was trading at Rs 238, up 2.1 percent, from the previous day’s close on the National Stock Exchange.

The government has sought additional profit petroleum (or its share from the oil and gas fields) after it reallocated certain costs between the areas in the block and disallowed a portion of the cost incurred on laying a pipeline to evacuate oil produced from the Rajasthan block.

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According to the contract terms, companies have the authorisation to recoup all the expenses they have borne before sharing the profits with the government in a pre-agreed proportion. If a particular portion of the cost is disallowed, it would result in higher profits and a higher share to the government. Vedanta had challenged such a demand before an arbitration tribunal.

“The company has received an arbitration award dated August 23 upholding the contention of the company that additional profit petroleum, on account of Director General of Hydrocarbon (DGH) is not payable as per terms of the Production Sharing Contract for Rajasthan Block,” Vedanta said in a disclosure to the exchanges.

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