But due to differences between Cairn and Oil Natural Gas Corp (ONGC) over the payment of royalties the deal has been pending. ONGC gets just 30 per cent of the output from Cairn's oilfields, but it pays royalties on 100 per cent of the production under a "royalty holiday" scheme dating from the 1990s aimed at promoting private oil exploration in energy-hungry India.
ONGC has been pushing for an equal share of the royalties before the government approves the sale and Vedanta has mentioned its unwillingness to proceed with the deal if it is asked to share the royalty burden. The cabinet is split over whether the royalty row should be settled before or after the sale goes through.
Cairn Energy has warned India that imposing conditions on the deal might kill the deal and has also said to the Indian government that the deadline for sealing the transaction will not be stretched beyond the current extended deadline of May 20, according to the Indian Express newspaper.