Following top diplomatic pressures from the UK government, the ministries of petroleum and finance are learnt to have come up with a formula to resolve the impasse over royalty payment to ONGC that is holding up the $9.6 billion (Rs 43,500 crore) Cairn-Vedanta deal.
The Prime Minister's Office (PMO) is understood to have intervened in the matter in the wake of diplomatic pressure from the UK government for clearing the stake sale.
Informed sources told HT that a new formula is being proposed for calculating levies — royalty and cess — on the crude oil produced at Cairn India's Rajasthan oil block, which is its most productive asset.
Under the new formula, the actual royalty burden on ONGC will reduce substantially from the current level and will come more or less in line with the old royalty and cess rates.The cess burden on Cairn India and Vedanta will also reduce, and would lead to Cairn India withdrawing litigations against the government over the cess issue, said sources.
Sources said that to save processing time, SEBI may be instructed to simultaneously start the approval process in order to allow Cairn Energy Plc to transfer its majority shareholding in favour of Anil Agarwal's Vedanta Resources.
"All the re-working being proposed is well within the contours of the production sharing contract entered into between Cairn India and the government of India," a senior petroleum ministry official said.