BS reported that the Indian cabinet is likely to consider giving approval to the Vedanta Resources USD 9.6 billion buyout of Cairn India next week.

An official with direct knowledge of the matter said that "Comments on the draft note that oil ministry circulated last month have not been received from all the ministries. A couple of ministries are yet to give their comments.”

Oil ministry will move Cabinet Committee on Economic Affairs once comments from ministries of finance, law, home, environment and corporate affairs are received.

In all probability, the CCEA is likely to give an in principal nod to the deal where London-based mining group Vedanta, which has no prior experience in oil sector, is buying up to 51% stake of UK's Cairn Energy.

Oil Ministry has watered down its preconditions and has almost withdrawn its contention that INR 21,802 crore in royalty and cess paid by ONGC on behalf of Cairn India from the Rajasthan oilfields should be equitably shared.

An official said that "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. 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.”

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.

Another official said that 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.

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 in the case of cess. On royalty, it shall take appropriate decision to enforce the provisions of PSC to make royalty cost-recoverable. Cairn Energy

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.

(Sourced from BS)