Mumbai, March 14: Confusion prevailed on Monday over reports that first said the market regulator had cleared the open offer by Anil Agarwal-controlled Vedanta for Cairn India — and then quickly recanted.

Vedanta had sealed a deal with Cairn Energy Plc to pick up a controlling interest of up to 51 per cent in Cairn India but has failed to win the necessary approvals from statutory authorities for close to seven months. Vedanta has offered to buy out the controlling stake in Cairn India for $9.6 billion.

It later emerged that the proposal wouldn’t come up for discussion at a meeting of the Union cabinet later this week.

Earlier in the day, Sebi’s website said the regulator had made its final observations on Vedanta group’s Rs 13,610-crore open offer to acquire an additional 20 per cent stake from minority shareholders of Cairn India.

The market saw this as a signal that the open offer had been finally approved. Later, however, the status of the open offer was corrected to one that was still “under process”. Sebi sources have billed this episode as an inadvertent error.

However, it was speculated that Sebi was unlikely to give its approval before the Cabinet had cleared the transaction that has been dogged by disagreements over royalty payments. State-controlled Oil and Natural Gas Corporation (ONGC) has a 30 per cent stake in some Cairn India assets — in Rajasthan — but has to pay a 100 per cent royalty on these because of historical commitments it had made while trying to attract oil explorers to India. Estimates indicate that over the life of the field in the Rajasthan block, royalties work out to around Rs 18,000 crore. ONGC has to shoulder the burden of Cairn India’s share of Rs 12,600 crore.

Disagreements on sharing the royalty payments have contributed to the delay in closing the deal as Cairn India has not been able to secure a no objection certificate (NoC) from its partner ONGC, a pre-condition for government approval.

There are some other issues that have also contributed to Vedanta’s inability to close the transaction. Minority shareholders have been protesting against a non-compete fee to Cairn Plc which was not given to them. The minority shareholders were being offered Rs 355 a share against a price of Rs 405 offered to Cairn Plc by Vedanta Resources.

The open offer was supposed to open on October 11 and close on October 30, 2010. However, Sebi dilly-dallied on the approval process after the oil ministry put forth its objections to the transaction that marks Vedanta’s entry into the oil sector in India.

Cairn India and Vedanta have up to April 15 to close the transaction.