India said it granted Vedanta Resources conditional approval on Thursday to buy a stake in British oil explorer Cairn Energy's Indian business, in a deal valued at around $6 billion. Cairn Energy agreed last week to sell a 40 percent stake in Cairn India to Vedanta. The sale, one of the largest in India's energy sector, has been delayed for more than 10 months due to a disagreement over royalty payments.
India's oil ministry has been pushing for Cairn India to share royalty payments with state-run Oil and Natural Gas Corp , which has a 30-percent holding in the Cairn-operated fields in western India but pays 100 percent of the royalties. Cairn and Vedanta cut the price of the deal earlier this week in a move interpreted as bringing the pair closer to agreeing to India's demand that royalty payments be shared. Treating royalty as a cost for developing the field would mean sharing the burden between the two partners, effectively reducing Cairn India's profitability.
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