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Vedanta Wins Arbitration Against Government In $1.1 Billion Cost Disallowance Case According to the contract, companies can recover all costs incurred before splitting profit with the government in a pre-determined ratio

By Teena Jose

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Anil Agarwal's Vedanta Ltd has won an arbitration against a demand for a higher payout from its Rajasthan oil and gas fields after disallowance of INR 9,545 crore ($ 1.16 billion) in certain costs incurred, according to a PTI report.

The government sought its share from the oil and gas fields after it reallocated certain costs between the fields in the block and disallowed a portion of the cost incurred on laying a pipeline to evacuate oil.

According to the contract, companies can recover all costs incurred before splitting profit with the government in a pre-determined ratio. If the government disallows a certain portion of the cost, it will get higher profits and shares. Vedanta challenged this demand before an arbitration tribunal, PTI reported citing a company statement.

"The company has received an arbitration award dated August 23, 2023... upholding the contention of the company that additional profit petroleum, on account of Director General of Hydrocarbon (DGH) audit exceptions in relation to allocation of common development costs across Development Areas and certain other matters, is not payable as per terms of the Production Sharing Contract for Rajasthan Block," Vedanta said in a stock exchange filing.

Vedanta has, however, not made the details of the arbitration award public. In the statement, the company said that, "The company is in the process of reviewing the award in detail and evaluating its financial impact."

The mining major put the number at INR 9,545 crore in its latest annual report released last month, as per available sources.

Teena Jose

News Desk Reporter with Entrepreneur India

Teena is a post graduate in financial journalism. She has an avid interest in content creation, digital media and fashion.
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