Cairn-Vedanta deal: Govt to have final say on royalty

The union government will reserve the right to decide on the amount of royalty recoverable from Cairn India's block in Barmer while clearing Cairn Energy's sale of its Indian subsidiary to Vedanta Resources, according to a report.

Besides, the companies will not be able to formalise the deal till Cairn India's partners in all its Indian blocks, including the government-owned Oil & Natural Gas Commission, give a no-objection certificate (NOC).

As the original licensee, ONGC pays royalty on the entire production from the Barmer block, though it has only 30-per cent interest in it. In the event of cost recovery of royalty, ONGC's burden will be partially shared by Cairn and the government - as the portion of petroleum after deduction of costs, called profit petroleum, will come down.

The $9.6-billion deal is expected to go for the approval of the cabinet committee on economic affairs (CCEA) either this week or next.

Taking a tough stand, the ministry of petroleum and natural gas told the companies that the conditions were being attached as Cairn had dragged the government into litigation.

The report quoted an unnamed senior official to say that while the government might clear the deal, the issues of cost recoverability of royalty and payment of cess would impact the valuation, especially if ONGC decides to give a NOC only if Cairn agrees to cost recoverability. ''The ONGC board will have a final say on NOC,'' said the official.