Royalty on the Cairn-operated Barmer block is cost-recoverable, the petroleum ministry has written in the Cabinet note. The note is being circulated for seeking a nod from the Cabinet Committee on Economic Affairs (CCEA) on the Cairn-Vedanta deal.
“We have sent out a Cabinet note. When it will be put up before the CCEA depends on the Cabinet secretariat,” Oil Minister S Jaipal Reddy said.
In January, an ONGC board resolution had urged the ministry not to clear the Vedanta deal till Cairn resolve the royalty issue. ONGC will end up paying Rs 14,000 crore as royalty for the life of Rajasthan block.
According to licence conditions for the Rajasthan block, ONGC has the right to take 30 per cent in any discovery free of cost, but the state-run firm has to pay not only its share of royalty, but also 70 per cent share of the operator. Royalty of 20 per cent has to be paid to the Rajasthan government on the price crude may fetch.
ONGC said it would pay Rs 14,000 crore royalty on behalf of Cairn India over the life of the fields and wants to recover it from oil sale. Cairn is not agreeable to the proposal, since acceptance of the demand would impact Cairn India's valuation.