The government is unlikely to clear London-listed Vedanta Resources' acquisition of majority stake in

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Cairn India in a hurry, as it sees an opportunity in the deal to settle state-owned ONGC's negative returns from the latter's Rajasthan oil fields.

Edinburgh-based Cairn Energy is selling the majority of its 62.37 per cent stake in subsidiary Cairn India to Vedanta. But the deal is contingent upon government approval.

"Oil and Natural Gas Corp (ONGC) has invested USD 1.3 billion in Rajasthan fields (which are Cairn India's biggest assets) and ideally, it is ONGC who should takeover Cairn Energy's interest," a senior government official said.

In fact, in 2005, Cairn Energy had offered its interest in the Rajasthan and other fields to ONGC for close to USD 5 billion, but when the PSU did not agree with the valuation, it floated a India unit and listed the firm on the stock exchanges in 2006.

"It is a matter of concern that a non-energy firm is to take over operatorship of these complex fields. World-over, governments insist on prior experience before companies are allowed even to explore. And here is a firm which has never even seen an oilfield," the official said.

Vedanta's deal will be contingent on government approval, as Cairn's three producing oil and gas assets, including the giant Rajasthan fields and seven exploration blocks, either have explicit provisions for seeking prior approval before transfer of interest or gives pre-emption, or the right of first refusal (ROFR), to partners like ONGC.

The official said the stake sale now offers the government an opportunity to settle the issue of the Rs 14,000 crore loss that ONGC will incur over the life of the Rajasthan oil fields, as it has to pay statutory levies like cess and royalty on behalf of Cairn India.

ONGC has 30 per cent interest in the Rajasthan fields, but has to pay cess and royalty on the entire production, thereby giving negative returns on its investments.

"We are not in a hurry to do anything just yet. We need to make sure that our PSU's interest is protected," he said.

The Production Sharing Contract (PSC) for the Rajasthan field is silent on government approval for transfer of ownership, but the Joint Operating Agreement between Cairn India and ONGC gives the partners ROFR in case of stake sale.

The same is the case with gas discovery block CB-OS-2 and the eastern offshore Ravva oil and gas fields. But its seven exploration blocks, including the KG-DWN-98/2 block with ONGC, have explicit provisions for government approval in case of a change in control.

"We will need to study PSC provisions carefully before we do anything," the official said.