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NEW DELHI, April 4 (Reuters) - India's top economic policy panel is expected to take a decision on Wednesday on a long pending approval for Cairn Energy Plc's deal to sell a stake in its Indian unit to Vedanta Resources , the Economic Times reported on Monday.
Cairn agreed in August to sell up to 51 percent of Cairn India for up to $9.6 billion, but the transaction has been delayed due to a dispute over royalty payment by state-run Oil and Natural Gas Corp that has a 30 percent holding in the Cairn-operated Rajasthan fields in western India but pays 100 percent royalty.

"The Cairn-Vedanta issue is listed in the Wednesday agenda of CCEA (cabinet committee on economic affairs)," the newspaper said citing an unnamed government official.

A CCEA approval will be final.

In a separate report, the paper said ONGC was not willing to lose 140 billion rupees in royalty unless it was cost recoverable.

Last week, Oil Minister S. Jaipal said he viewed the Cairn-Vedanta deal royalty issue as cost recoverable. [ID:nL3E7ES19W] (Reporting by Mayank Bhardwaj; Editing by Ranjit Gangadharan)

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4 APR, 2011, 06.06AM IST,ET BUREAU
Govt to consider Cairn's stake sale to Vedanta on Wednesday

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NEW DELHI: The government will consider British energy explorer Cairn Energy's proposal to sell a controlling stake in its Indian arm to Anil Agarwal promoted Vedanta Resources for $9.6 billion on Wednesday.

"The Cairn-Vedanta issue is listed in the Wednesday agenda of CCEA (cabinet committee on economic affairs)," a government official said. It is expected that the CCEA would give its approval to the deal but the government would also back state-run ONGC's demand to make royalty cost recoverable, something not acceptable to Cairn, two members of the CCEA, who did not wish to be named, said.

" ONGC will have rights to seek legal remedies and the oil ministry will support it," one of them said. On March 28, oil minister S Jaipal Reddy supported state-run ONGC that the royalty paid in the Rajasthan block was cost recoverable. "We are of the view that royalty should be treated as cost recoverable," Mr Reddy had said.

"Whether it should be a condition for the deal would be decided by CCEA," he had told reporters last week. ONGC, which holds a 30% stake in Cairn-operated Rajasthan fields, pays royalties on the entire output as per a 15-year old contract. But it cites the same contract to claim that the royalty paid by it should be treated as expenditure and recovered from the revenue.

Cairn contests its claim as this would significantly reduce its profit from the block and affect the valuation of Cairn-Vedanta deal. The controversial deal, announced on August 16 was first delayed due to Cairn's initial insistence that the transaction did not require the government's approval.

After they formally sought the government's approval in the last week of November, the decision was delayed due to a spat between Cairn and its partner ONGC over computation of royalty paid for the Rajasthan block, the central asset that comprises over 90% of the deal size.