More than 10 months after USD 9.6 billion-deal was first struck, the Indian government Thursday gave its approval to Cairn Energy for selling its Indian unit to Vedanta Resources, subject to the new owner agreeing to share royalty and pay oil cess on mainstay Rajasthan oilfields.

The cabinet committee on economic affairs (CCEA) headed by Indian prime minister Manmohan Singh approved the sale with the preconditions that Cairn or its successor has to treat royalty payments on Rajasthan oilfields as recoverable from oil sales, oil minister S Jaipal Reddy told reporters here.

Also, Cairn India will have to withdraw the arbitration it has initiated disputing its liability to pay Rs 2,500 per ton oil cess on its 70 per cent share in the fields.

Besides, the approval will be subject to ONGC, which has a stake in all the three oil and gas producing properties and five out of seven exploration assets of Cairn India, waiving its pre-emption rights, which Reddy termed as the partner's no-objection certificate (NOC).

He said the deal would also need the security clearance.

"The CCEA endorsed the recommendation of a group of ministers headed by finance minister Pranab Mukherjee, which was asked to go into the transaction," he said.

Asked if the report of the serious fraud investigation office (SFIO), which had found Vedanta group firm Sesa Goa guilty of misconduct, would in anyway affect the government approval, Reddy said he has communicated the decision taken by the CCEA.

Refusing to say if the SFIO report was discussed, he said "The CCEA records decision not the thoughts."