ONGC issue must be addressed before clearance to Vedanta: Govt

"We are for expediting the process (of approval) after addressing all the concerns particularly relating to (ONGC's liability) to pay royalty and cess on behalf of Cairn India," a highly placed source said.

Oil Secretary S Sundareshan had yesterday met chief executives of Vedanta and Cairn Energy, which is selling most of its stake in its Indian unit, but the meeting was inconclusive.

Another meeting was said to happen today but it has not yet been scheduled. Sources said the two sides went through each of the 11 preconditions that Oil Ministry had set for approving the deal. Cairn/Vedanta explained their point of view.

The Oil Ministry, however, held its ground on the precondition that state-run ONGC's royalty liability in Cairn India's mainstay Rajasthan block will have to be addressed before such approval.

The Rajasthan block, which gives Cairn India 90 per cent of its valuation, is a losing proposition for ONGC, as it has to pay 20 per cent royalty to the state government on the entire output from the field, even though its share of production is only 30 per cent.

Cairn India does not pay royalty on the crude and has even contested the payment of Rs 2,500 per tonne cess on its 70 per cent share. The source said the ministry "doesn't want to stand in the way of the deal, but the two issues need to be addressed."

While Sundareshan had yesterday described the 90-minute deliberation as "extremely constructive", Cairn Energy -- which is selling most of its stake in its Indian unit to Vedanta -- hoped to complete the transaction on schedule by April 15.

This was the first time the Oil Ministry met Edinburgh-based Cairn Energy Plc Chief Executive Bill Gammell, Cairn India CEO Rahul Dhir and Vedanta representatives M S Mehta (Group CEO) and Tarun Jain (CFO) together.

Cairn/Vedanta wanted oil ministry to give approval without insisting on three out of the 11 preconditions. The preconditions include Cairn/Vedanta meeting conditions like agreeing to ONGC's demand for recovering the Rs 14,000 crore royalty the state firm will have to pay on behalf of Cairn India from the sale of oil produced from Rajasthan fields.