Sterlite Industries will offer to buy the government's 49% stake in group company Balco at a mutually agreed price outside of an earlier call option plan, as both parties are keen to resolve stake sale talks deadlocked for a year.

If Sterlite's proposal is accepted, it will complete the Mr Anil Agarwal promoted company's 100% ownership of Balco besides helping the government meet its disinvestments target for the current fiscal.

The government, which plans to raise INR 40,000 crore this fiscal by selling stake in public sector enterprises, has managed to raise only a fraction of it so far, hemmed in by an adverse equities market. A person familiar with the development and part of the negotiations said that "The government is now willing to consider a fresh proposal from the company. The company will also examine alternatives that will be outside the call option route.”

An Empowered Group of Ministers has asked Sterlite for the fresh offer and has so far not considered past valuation exercises.

Sterlite Industries, a copper maker and part of billionaire Anil Agarwal's Vedanta Resources, had bid for and bought the government's 51% stake in Balco for INR 551.50 crore in a high profile disinvestment exercise in 2001.

The two parties also agreed that the government's remaining stake would be sold by exercising call options after three years. Call option is an agreement that gives the buyer a right to buy part of an asset at a specified price within a specified timeframe.

However, the government later retracted saying the agreed price was too low, prompting protests from Sterlite and pushing the issue into arbitration.