Cairn-Vedanta deal gets conditional clearance

But with two riders—Cairn will now have to bear royalty on its Barmer fields in Rajasthan retrospectively and also withdraw cess arbitration. This means Cairn India will have to lose out to the tune of Rs 16, 800 crore but experts say this deal is a positive for Vedanta and ONGC. This royalty, Oil Minister Jaipal Reddy said would be treated as a cost recoverable item.

Cairn India will also have to withdraw the arbitration suit it had filed against cess payment implying that the company will have to pay Rs 2,500 per tonne cess on its 70% share in Rajasthan.

"The cabinet has endorsed the group of minister's (GoM's) recommendations of conditional approval," Reddy said adding that no fresh conditions have been imposed by CCEA.

What next?

Cairn India needs to obtain a no-objection certificate from its partner. It is also for Vedanta to take a view on the conditions. The companies will then have to commit to conditions or no approval.

British oil explorer agreed last August to sell a majority stake in Cairn India to Vedanta. But the sale, one of the largest in India's energy sector, has been delayed due to a disagreement over royalty payments.

Earlier this week, Cairn and Vedanta agreed to cut the price of the deal for 40% stake by more than USD 600 million.

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