Finance Ministry to seek cabinet nod for tax talks with Vodafone

The finance ministry is likely to seek permission from the Cabinet to enter into discussions with Vodafone Plc to settle the long-running $2-billion tax dispute between the Indian government and British telecom giant, according to sources familiar with the matter.

A top finance ministry official said the Cabinet is likely to authorise Finance Minister P Chidambaram to work out a settlement. The ministry will approach the Cabinet in the next two weeks, ministry sources said.

The sources also said a formal nod from the Cabinet was essential since any settlement through negotiations may appear to be improper in view of the controversial retrospective amendment to the tax laws in last year's budget. The amendment sought to tax overseas deals in which Indian assets changed hands.

The development comes days ahead of British Prime Minister David Cameron's visit, where he is expected to discuss the Vodafone dispute with PM Manmohan Singh. Vodafone has threatened to initiate arbitration proceedings against the government, but both sides are keen to resolve the matter amicably, the sources said.

The retrospective law, which has angered investors, might be repealed once the matter was settled, the sources said. The details of the possible settlement would be formulated once the Cabinet gave its nod.