'Centre can ask 10% more profit share in Barmer field to extend PSC with Vedanta'

New Delhi: The Delhi High Court Friday said the Centre can demand 10 per cent higher share in the profit derived from oil produced by Vedanta from the Barmer oil field in Rajasthan to extend the production sharing contract (PSC) with the company for another 10 years.

A bench of Chief Justice D N Patel and Justice Jyoti Singh said no embargo can be placed on the right of the government to extend the contract on terms which are at variance with the initial terms of the PSC, "so long as they are in public interest and subserve the purpose of maximising revenue generation".

The court also said that Vedanta does not have the right to demand extension of the PSC on unilateral terms that suit its interest, overlooking the interest of the State, which is a trustee of the natural resources under a Constitutional mandate.

"For all the aforesaid reasons, we hold that there cannot be extension of the PSC unconditionally, on the same terms and conditions which were prevailing 25 years ago i.e. on May 15, 1995, the effective date," the bench said.

With these observations, the court set aside a single judge order of May 31, 2018 directing the government to extend the tenure of the contract in question for a period of 10 years, till 2030, on the same terms and conditions as existed on May 15, 1995, when the PSC was initially executed.

The judgement by the bench came on the appeal by the Centre, represented by Solicitor General Tushar Mehta, challenging the single judge's May 2018 order on Vedanta's plea for extension of the PSC which the company and the Oil and Natural Gas Corporation (ONGC) have with the government to extract oil from the Barmer block in Rajasthan

ONGC had communicated its approval for extension of the PSC in July 2016, after which the Centre had assured the court it would positively take a decision by October of the same year.

However, later it had sought more time as it was framing a uniform policy with regard to all such PSCs.

Thereafter, it came with a policy dated April 7, 2017 which was applicable to all existing PSCs and which stipulated that extension of a PSC, after expiry of initial period of contract, would be granted on payment of an additional 10 per cent profit to the


Vedanta, represented by senior advocate Harish Salve, had on the other hand claimed that the PSC has to be extended on the same terms which existed when the contract was first entered into.

While the single judge had agreed with Vedanta's contention, the division bench in its 54 page judgement has said that the government has the power to impose a condition, in view of the policy decision, for a higher share in the profit, during the

extended period.

The bench said that the government's demand for a 10 per cent higher share in the profits came after 25 years of the initial date of contract and "cannot by any stretch be termed as unreasonable or arbitrary".

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