THE chief executive of Cairn Energy Simon Thomson has accused the Indian Government of forcing the oil and gas firm to shed around 40 per cent of its workforce following a tax claim he said was spurious.

Mr Thomson said the Edinburgh-based company had to axe jobs and sell off assets in order to save cash after the government slapped a $1.6bn (£1bn) tax demand on it last year.

"Our view is that the tax claim is spurious and in breach of our fundamental rights as an international investor,” Mr Thomson told India’s Economic Times.

“As a result, we have made 40 per cent of our workforce redundant, disposed of part of our North Sea assets and deferred planned investments and expenditures.”

Mr Thomson’s comments underlined the seriousness of an issue which the UK government is trying to help Cairn Energy resolve.

They came as India’s prime minister Narendra Modi started a three day visit to the UK yesterday.

"The UK Government has been of great assistance in highlighting the situation with the Indian authorities,” said Mr Thomson.

“They are fully aware that this matter continues to impact our business and be of significant concern to our international shareholders and those looking to invest in India."

The executive said Cairn had been forced to slash spending because the company has been prevented from selling its remaining stake in its former subsidiary, Cairn India, by the country’s government.

The dispute has dragged on amid the plunge in the crude price, which has sent the value of the Cairn India operation tumbling.

The value of Cairn Energy’s stake in the business fell from about $1bn when the dispute started in January last year, to $526m at June 30.

Cairn launched a redundancy programme in August last year. It employed around 200 people at the time plus an unspecified number of contractors. Mr Thomson’s comments indicate around 80 employees left subsequently, with some contractors.

In September last year Cairn eased the pressure on its finances resulting from the tax dispute by selling a 10 per cent stake in the giant Catcher field off Scotland to Dyas of Holland for up to around £110m.

The Indian Government has imposed a retrospective tax demand on Cairn Energy concerning events leading up to the 2007 flotation of Cairn India. The business owns acreage on which Cairn Energy made a series of bumper finds under founder Sir Bill Gammell.

Cairn Energy insists it has paid all taxes due.

Cairn Energy sold a majority stake in Cairn India to Vedanta Resources for $5.5bn in 2011, and paid $3.5bn of the proceeds to shareholders.

Mr Thomson took charge in that year. He has refocused Cairn, to combine potentially transformational exploration in areas like West Africa with lower risk field development activity in the North Sea.

Cairn made two discoveries off Senegal last year.