Will Cairn be asked to re-apply for govt nod?

The Delhi High Court in its ruling said: "An interpretation, either of a law or a contract, which impinges on the sovereign power of the state to safeguard its vital and strategic interests (and not just commercial interests), would be eschewed by the court to save the law, or the contract, from being void on the ground of it being opposed to public policy".

Sources said the watered down conditions for approval of the Cairn-Vedanta deal are likely to be considered by the Cabinet only next week.

The Oil Ministry wanted the deal to come up before the Cabinet Committee on Economic Affairs (CCEA) this week, but it is not listed for the meeting slated for tomorrow.

The ministry has watered down its preconditions and has almost withdrawn its condition that Rs 21,802 crore in royalty and cess paid by ONGC on behalf of Cairn India from the Rajasthan oilfields should be equitably shared.

"In January, the Oil Ministry wanted the Cabinet to give its nod only after Cairn India agrees to equitable sharing of royalty and paying its share of cess," the source said.

"However, in the note that was finally circulated, the Oil Ministry has given an alternative that it will continue to legally pursue equitable sharing of royalty and cess, but will not make it a precondition for approval of the deal," he said.

The note lists two alternatives. In the first, it lists out five preconditions, instead of the 11 it had originally proposed to Cairn/Vedanta in January.

The five preconditions include royalty being made cost-recoverable, Cairn India withdrawing arbitration disputing its liability to pay cess, Cairn India obtaining partner ONGC''s no-objection and Vedanta providing performance and financial guarantees, the source said.

As an alternative to the precondition of royalty and cess, the ministry has suggested that government shall pursue all legal recourse for establishing its rights under the Production Sharing Contract (PSC) in the case of cess. On royalty, it shall take appropriate decision to enforce the provisions of PSC to make royalty cost-recoverable.

Sources said it was unlikely that the Cabinet will go with the first option when an easier and least controversial option has been given in the second.

But the condition that Cairn India will have to obtain a no objection certificate (NOC) from its partner Oil and Natural Gas Corp (ONGC) has been retained, the source said.

ONGC holds a stake in eight out of 10 properties held by Cairn India.

The ministry is of the view that the change of control of Cairn India amounts to an indirect assignment or transfer of participating interest in the blocks and therefore there is a need for the government, as well as the partner''s nod.