Shares of Edinburgh-based oil and gas company Cairn Energy rose another 7% on Friday — following a jump of 26% on Thursday — after London’s Financial Times newspaper reported that India expects to refund $1 billion to Cairn after it moved to scrap a retrospective tax law that caused a long battle with foreign investors.
The newspaper reported that India’s 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.
Cairn was awarded damages of more than $1.2 billion last year at a tribunal at The Hague after a long battle with India over certain tax claims.
Analysts said the new legal initiative would allow India to resolve the bitter international tax battle with Cairn, which has sought in recent months to seize some of the Indian government’s overseas assets.
“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 …
“All the demands that have been created will be nullified.”
Bajaj said that to settle, the affected companies would “agree only to accept the principal amount, and not interest or anything else.”
Cairn said on Thursday: “We have noted the introduction to the Indian parliament of the Taxation Laws (Amendment) Bill 2021, which proposes certain amendments to the retrospective taxation measures that were introduced by the Finance Act 2012.
“We are monitoring the situation and will provide a further update in due course.”
On Friday, Cairn declined to comment.