The ministry has watered down the 11 preconditions it had in Jan proposed for giving Vedanta the nod to buy a 51 per cent stake from UK's Cairn Energy, officials with direct knowledge of the matter said.
"But the condition that Cairn India will have to obtain no objection certificate (NOC) from its partner (ONGC) has been retained," one of the officials said.
State-owned Oil and Natural Gas Corp (ONGC) holds a stake in eight out of 10 properties held by Cairn India in the country. The ministry is of the view that the change of control of Cairn India amounts to an indirect assignment or transfer of participating interest in the blocks and so there is a need for the government as well as the partner's nod.
He said this position has also been upheld by the law ministry and the nation's second highest law offer, the SGI.
"The Oil Ministry has moved a Cabinet note seeking approval for the deal subject to Cairn India and its subsidiaries seeking a NOC from partner ONGC," he added.
The issue may come up before the Cabinet next week.
The ministry has, however, completely withdrawn the precondition asking Cairn India to give up its legal rights on future disputes over its mainstay Rajasthan oilfield and abide by the government and oil regulator DGH's diktat.
"The Law Ministry, in its opinion on the preconditions, stated that any terms and conditions to be stipulated should be mutually agreed and they cannot be unilaterally imposed," the official said. "The condition that Cairn has to forego its legal right shall be void under the Indian Contract Act."
In a draft Cabinet note circulated for approving the deal, the Oil Ministry has almost withdrawn its precondition that Rs. 21,802 crore in royalty and cess paid by state-owned ONGC on behalf of Cairn India on production from the Rajasthan oilfields should be equitably shared.
"In January, the Oil Ministry wanted the Cabinet to give its nod only after Cairn India agrees to equitable sharing of royalty and paying its sharing of cess," an official said.
"However, in the note that was finally circulated to the ministries of finance, law, home, environment and corporate affairs for comments, the Petroleum Ministry has given an alternative that it will continue to legally pursue equitable sharing of royalty and cess, but will not make it a precondition for approval of the deal," the official said.
The note lists two alternatives. In the first, it lists out five preconditions, instead of the 11 it had originally proposed to Cairn/Vedanta in Jan.