Cairn India Ltd. (532792.BY), a unit of U.K.-listed Cairn Energy PLC (CNE.LN), said Wednesday it has arranged $1.6 billion of debt to fund the development of its oil fields and to repay an existing $850 million loan.

The borrowings, in dollars and Indian rupees, have a tenure of six years, the oil producer said in a statement.

"This (fundraising) is in line with our strategy of funding development expenditure through debt and realigning the company's capital structure to provide financial flexibility for the future," Chief Executive Rahul Dhir said.

Cairn India operates and has a 70% stake in the RJ-ON-90/1 oil block in the western state of Rajasthan, where Oil & Natural Gas Corp. (500312.BY), the country's largest oil and gas producer, holds the remaining 30%. The block includes Mangala, Aishwariya, Saraswati and Raageshwari fields.

Cairn India pumped in $2.0 billion before it began production at the Mangala field in the end of August. The company will invest another $1.1 billion-$1.3 billion over the next two years to ramp up output, it said at that time.

Cairn India said the $1.6 billion debt it raised includes $750 million from abroad - $500 million fully underwritten by Standard Chartered Bank and $250 million from World Bank unit International Finance Corp.

State Bank of India underwrote domestic borrowing of INR40 billion ($850 million).

-By Rakesh Sharma, Dow Jones Newswires; +91-11-4356-3334; rakesh.sharma@dowjones.com