New Delhi, (Agencies): State-owned Oil and Natural Gas Corp (ONGC), which wants to recover the statutory levy has paid about Rs 1,183 crore in royalty on behalf of its partner Cairn India in the prolific Rajasthan block during the first nine months of the current fiscal.

ONGC, which owns 30 per cent in Cairn India's mainstay Rajasthan block is liable to pay royalty on the entire output from the field.

ONGC, had on July 14, 2010 written to Cairn India saying the royalty it pays should be, like all other state and centre levies, duties, fee and other charges, recovered from sale of oil.

Cairn India has contested the demand saying there was no provision for recovering licensee fee (ONGC is the licensee of Rajasthan block and thus is liable to pay royalty on all of the crude oil despite its share in the production being limited to 30 per cent) from sale of oil.

The dispute, like the similar dispute on that bears Rs 2,500 per ton cess on oil, could have gone to arbitration irrespective of whether or not Vedanta was successful in acquiring up to 60 per cent stake.

But ONGC has made the issue of recovering the royalty from sale of oil a pre-condition for approving the Cairn-Vedanta deal.
ONGC, which is partner in 8 out of the 10 properties held by Cairn India including the giant Rajasthan block, has claimed pre-emption rights or right of first refusal, a demand that has been backed by the Solicitor General of India (SGI).