Following India’s Cairns pulling out of off-shore gas exploration activities recently, another international tender would be called for in October for gas exploration in the Mannar Basin, said Minister of Power and Energy Patali Champika Ranawaka while speaking at a function in Colombo.

Cairn India which claimed it had discovered natural gas deposits off the shores of Mannar pulled out from the explorations recently.

Cairn India stated that since crude oil prices were falling in the world market and the increasing pressure on the company it had decided that the natural gas exploration activities off the shores of Mannar was not a priority.

In July 2008 Sri Lanka entered into an agreement with Cairns India for off-shore oil explorations within one block of the Mannar Basin.

Minister Champika Ranawaka also said that all the power generation plants of the Ceylon Electricity Board being run on diesel and similar fuel would be converted to run on natural gas.

Meanwhile, the Indian media reports that the globally diversified natural resources company Vedanta Resources, with interests in zinc, lead, silver, copper, iron Ore, aluminium, power, oil and gas and of which Cairns India is a subsidiary, is believed to be in the final stages of announcing a merger of Cairn India with itself. The move will give the parent company access to Cairn's cash and help reduce debt.

Cairn India’s parent company Vedanta group is reportedly grappling with huge debt as regulatory hurdles and weak commodities prices hit cash flow of group companies.

British oil explorer Cairn Energy, which has 9.8% stake in Cairn India, is fighting a bitter tax dispute with the Indian government.

The government has asked Cairn Energy to pay US$ 1.6 billion on an alleged Indian Rupees 24,500 crore capital gains it booked in 2006 by transferring its assets in India to a new company, Cairn India, and getting it listed. India's largest insurer Life Insurance Corporation of India owns 9.06% in Cairn India while mutual funds own 1% in the company.

Hindustan Zinc, another listed subsidiary of Vedanta in which the government owns 29.5%, holds cash of more Rs. 30,000 crore. But Vedanta cannot access this cash without the government's approval.