India offers Cairn Energy $1-bn refund after scrapping retro tax: Report

India expects to refund $1 billion to UK-based Cairn Energy after it moved to scrap a retrospective tax law that unleashed bitter fights with prominent foreign investors, Financial Times reported.

The lower house of parliament on Friday approved a draft law introduced the previous day, cancelling a 2012 policy that enabled New Delhi to tax some foreign investments retrospectively. The upper house is expected to approve the law as early as next week.

New Delhi would also drop $13.5 billion in outstanding claims against multinationals such as telecoms group Vodafone, pharmaceuticals company Sanofi and brewer SABMiller, now owned by AB InBev, as part of efforts to repair its damaged reputation as an investment destination, the report said.

Analysts say the legal initiative would allow New Delhi to resolve a bitter international tax battle with Cairn that has grown increasingly embarrassing for India. The UK energy group has sought in recent months to seize some of the government’s estimated $70bn worth of overseas assets.

“It’s a settlement offer masquerading as a law,” said one foreign business analyst, who requested anonymity. Prime Minister Narendra Modi’s government hopes the resolution of the dispute can bolster its reputation among foreign companies as it seeks new investment to revive India’s Covid-battered economy.

“We want to give a message to the investors that the country believes in the stability and certainty of taxation,” Tarun Bajaj, revenue secretary, told journalists on Friday. “Taxation is a sovereign right and can’t be taken away. But we should use it sparingly, judiciously.”

Bajaj said about $1.2 billion collected from companies under the soon to be scrapped tax provision would be refunded if the companies agreed to drop outstanding litigation, including claims for interest and penalties. About $1 billion of this would go to Cairn and $270 million to other groups including Vodafone, he added, as per the report.

(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)

Dear Reader,

Business Standard has always strived hard to provide up-to-date information and commentary on developments that are of interest to you and have wider political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering have only made our resolve and commitment to these ideals stronger. Even during these difficult times arising out of Covid-19, we continue to remain committed to keeping you informed and updated with credible news, authoritative views and incisive commentary on topical issues of relevance.

We, however, have a request.

As we battle the economic impact of the pandemic, we need your support even more, so that we can continue to offer you more quality content. Our subscription model has seen an encouraging response from many of you, who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of offering you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practise the journalism to which we are committed.

Support quality journalism and subscribe to Business Standard.

Digital Editor