UK-India Free Trade relations and Cairn Energy PLC issue

Synopsis: With the conclusion of UK-EU trade agreement, now there is an opportunity to work towards UK-India Free Trade Agreement but resolving Cairn Energy issue must be a priority for that.  


Present developments provide an opportunity for both India and UK to move the bilateral economic plan forward.   

  • Both countries have common interest in the issues, such as climate change and the green economy, economic recovery of both the countries from COVID-19. 
  • After the conclusion of UK-EU trade agreement, UK can now focus on concluding trade agreements with key partners like India. 
  • The Oxford/AstraZeneca vaccine which has been approved in the UK was developed in collaboration between the Pune-based Serum Institute of India and the Wockhardt factory in the UK. 

Importance of resolving Cairn Energy PLC issue 

The recent ruling of arbitration court in the favour of Cairn Energy PLC marks an end to the long-running dispute between Cairn Energy PLC and the Indian government over a retrospective $1.2 billion tax demand imposed in 2015.  

For India-UK trade to move forward and save the cost of arbitration, this issue need to end here.  

  • Cairn Energy PLC was one such global investor whose belongings in India were held in an Indian company in which Indians sat on the board, which had Indian senior management, where many of the engineers were Indian.  
  • The Cairn India got success from a significant calculated risk. The resources which Cairn Energy PLC bought from an international major had failed to find hydrocarbons on the land.  
      • The purchase came with a major capital risk to drill several wells to totally explore the fields in Rajasthan.  
      • After the oil discovery, Cairn Energy PLC then developed these fields and installed new technology to extract the oil and transport it to refineries.  
      • During this entire period Cairn Energy PLC paid all taxes and dues on time and also invested in the local community, creating valuable infrastructure and jobs.  

Thus, there is no reason for dragging this matter any further. 

Why resolving cairns India issues will be beneficial for India? 

The Indian government has publicly stated in the past that the decision of the court would be honoured, so the decision of the court should end the matter.  

  • Firstly, timely and logical settlement of this dispute would lead to an instant validation of the desirability of India as an investment destination and also to India’s status in the international and domestic debt and equity markets. 
  • Secondly, a practical solution to the Vodafone and Cairn Energy judgments would improve India’s position at the top table of global economic powers. 
  • Third, as stated above, it was one of the thorny issues in the India-UK relations and good relations with UK will open many opportunities for India in the EU region.
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