The government is likely to approve the takeover of Cairn India by UK-based Vedanta Group for $9.8 billion, following the green signal given to the deal by market regulator Sebi.
"The Cabinet Committee on Economic Affairs (CCEA) has been scheduled for tomorrow afternoon...in all likelihood, it will give an in-principal approval to the Cairn-Vedanta deal," an official privy to the development said.
The official said the CCEA, headed by the Prime Minister, is likely to overrule the opinion of the Solicitor General of India that Vedanta must agree to equitably share royalty on oil produced from Cairn India's mainstay Rajasthan oilfields before the government nod.
"The pre-condition will be overruled by arguing that the government's take from Rajasthan oilfields will be impacted if Rs 18,000 crore royalty ONGC will pay, in excess of its share in the oilfields, is cost recovered from revenues," the official said, adding, "The government revenues will be dented by USD 1 billion."
As per provisions of Production Sharing Contract (PSC), all cost - capital and operating expenditure, and central and state levies are first deducted from revenues earned from selling oil and gas. Profits between stakeholders, including the government, are divided thereafter.
If 20 per cent royalty is also cost recovered - deducted from revenues like other project cost - profits left for all stakeholders to share will be lower.
So if government, over the life of the field was earning certain amount as its profit share, the cost recovery of the royalty will lower it by $1 billion.
The official said CCEA may, however, ask Cairn to seek ONGC's no-objection.
Meanwhile, Vedanta Group Chairman Anil Agarwal said in Mumbai today that the Securities and Exchange Board of India (Sebi) has approved the acquisition and the company would soon come out with an open offer.
"We have already received Sebi's approval for an open offer. The issue will open very soon. Within the next one to two days, we will send out the mails regarding this to all concerned," he said.
The Vedanta chief also appeared confident that the deal to acquire the majority stake in Cairn India, promoted by Edinburgh-based Cairn Energy Plc, would soon receive the government approval.
"We have a deadline of April 15 and I believe the government will give its approval before that," Agarwal said.
Asked about the ONGC issue, Agarwal said that the issue can be dealt later on.
"The royalty issue has to sorted out with the government and the ONGC. We can take up that issue later," he added.
Special 
