The mega $13-billion deal between Essar Oil and a consortium led by Russian oil giant has been red-flagged by the Home Ministry and its Intelligence Bureau in national security, according to media reports at the weekend.
Government sources told The Times of India that the Home Ministry and IB had raised concerns about Kremlin-owned company Rosneft being in control of Essar's Vadinar Port. The deal has been hailed as India's largest foreign direct investment (FDI) deal and was signed last year in the presence of Prime Minister Narendra Modi and Russian President Vladamir Putin in Goa on the sidelines of the BRICs Summit.
The government's objections are primarily based on the Vadinar Port's proximity to the border with Pakistan, and the presence of 3-4 defence installations in the vicinity.
ET Now said that it had learnt that the Prime Minister's Office will take the final call on whether the Vadinar Port should be a part of the transaction.
In response to ET Now's comprehensive questionnaire, an Essar spokesperson wrote, "All requisite approvals from Govt of india for the Essar Oil transaction to proceed are available. Your query pertaining to seeking Ministry of Home approval for the port has nothing to do with the present Essar-Roseneft-Trafigura-UCP deal. Hope this clarifies the matter adequately."
Rosneft and Trafigura, a Russian bank UCP & a Swiss commodity trading firm, are paying $13 billion to buy a 98 percent stake in Essar Oil that includes India's second largest refinery at Vadinar and nearly 3,000 fuel retail outlets. Out of the $13 billion, nearly $2 billion is for the 58-million tonne deep draft port in Vadinar that helps import crude and export finished products.
Earlier on Saturday, nearly 23 banks which form part of Essar Oil's Joint Lenders Forum, had approved the transaction with the Rosneft-led consortium. It was the lenders that had earlier not given their no-objection certificate, leading to the deal missing its closing deadline of March 31, 2017.
The deal, first announced in October last year, was held up after a few state-owned banks and Life Insurance Corporation (LIC) sought clearance of their dues in order to sign a no-objection certificate (NOC). It is learnt that LIC, to which the company owes around Rs 800 crore, still has some reservations.
A source close to the development told Indian Express that the company has proposed to prepay the due amount to LIC. "Essar Oil has given a prepayment letter to LIC for paying Rs 800 crore against Essar Oil, Vadinar Power and Vadinar Port," the source said.
The total debt of the Essar Group is estimated at Rs 1.17 lakh crore, with Essar Oil owing lenders approximately Rs 30,000 crore and Essar Steel having debt of around Rs 44,000 crore. Essar Power has borrowings of Rs 20,000 crore while Essar Global Fund has close to Rs 23,500 crore.
