Cairn Energy reduces staff to stem costs

* H1 loss $62 mln after tax vs $219 mln year before

* Takes $3 mln provision to cover proposed redundancies

* Re-confirms has been compliant with Indian tax legislation

* Says has cash position of $1.1 bln (Adds details, quote, background)

By Karolin Schaps

LONDON, Aug 19 (Reuters) - British-based oil explorer Cairn Energy Plc said it will trim its business to keep a lid on costs as it continued losing money over the first half of the year, with its Indian business under investigation by tax authorities.

Cairn pared its first-half loss to $62 million after tax from $219 million a year earlier, when it was hit hard by impairments booked in its Indian business.

Indian tax authorities are investigating Cairn's tax payments dating back about seven years, having already targeted companies including oil major Shell (LSE: RDSB.L - news) , South Korea's LG Electronics and France's Cap Gemini in a broad crackdown as India seeks to reduce its budget deficit.

"Cairn has re-confirmed with its advisers that throughout its history of operating in India the group has been fully compliant with the tax legislation in force in each year," the company said.

The inquiry means the parent firm is unable to tap its $1.1 billion stake in the business which it was planning on selling.

Cairn said it had made a $3 million provision to cover proposed redundancies and further provisions would be needed in the second half as it cuts costs.

The exploration company will focus on drilling fields in mature as well as emerging basins, with capital expenditure on its flagship Kraken and Catcher North Sea projects expected to reach $1 billion between 2015 and 2017.

The UK government approval of the Catcher development, operated by Premier Oil (LSE: PMO.L - news) , in June boosted Cairn's total reserves to 56.1 million barrels of oil equivalent through its 30 percent stake in the project.

Cairn said its cash position of $1.1 billion was adequate to pay for its operations in the foreseeable future as it plans to drill seven exploration and appraisal wells in the coming 12 months. (Reporting by Karolin Schaps; Editing by Keiron Henderson and David Holmes)