New Delhi: Britain's Cairn Energy chief Bill Gammell has been racking up air miles visiting India as he tries to salvage a $9.6-billion deal to sell the firm's Indian unit to resources giant Vedanta.

But even after months of talks with New Delhi and intervention by Britain's prime minister to push the deal, Gammell's efforts to sell Cairn's controlling stake in its India unit to Britain's Vendanta Resources have not achieved their goal.

Now the deal is to go before the federal cabinet for a ruling, which could come as early as this week.

Gammell says the sale is a litmus test for foreign investors mulling putting their money into India and anxious to know that they can get their funds out.

"Oil companies have the opportunity to invest anywhere in the world," Gammell said late last year in New Delhi. "India should be a destination for investments. Insofar as there are delays, it doesn’t help India."

London-listed Vedanta announced last August that it would buy up to 60 per cent of Cairn India for $9.6 billion, adding to its assets, which already include aluminium, copper, iron ore and zinc mines.

But India says it wants to set conditions before allowing Vedanta to assume control over Cairn India, whose biggest holding is the Mangala deposit in Rajasthan, the country's biggest onshore oil field.

The deal has been stalled by bitter differences between Cairn and its state-owned partner Oil and Natural Gas Corp (ONGC) over royalty payments.

Under a 'royalty holiday' scheme dating from the 1990s to promote oil exploration in energy-hungry India, Cairn currently pays no royalties on its share of production, which accounts for 70 per cent of the total.

At the time the scheme was introduced, nobody believed it would be possible to strike 'black gold' in Rajasthan - better known for its royal palaces and former princes.

ONGC controls the remaining 30 per cent of output, but has to pay royalties on Cairn's production as well as its own. It says it wants to pay a more equitable sharing of the royalties.

Oil Minister S. Jaipal Reddy referred the sale to the cabinet, saying the issue was 'too big for one ministry to handle'.

The impasse could not come at a worse time for India as foreign investment has slumped amid investors are worrying about a slew of corruption scandals that have shaken the government, including a suspected massive telecoms licensing fraud.

Foreign investment is vital for India, which needs to fund a $1 trillion scheme over the next five years to overhaul its dilapidated ports, airports, highways and other infrastructure to boost economic growth - money analysts say can only come if it offers an environment of regulatory certainty.

"There is a question of consistency of policy in India that worries foreign investors," said Deepak Lalwani, head of London-based Indian investment consultancy Lalcap.

In a rare move, British Prime Minister David Cameron pressed his Indian counterpart Manmohan Singh in a letter last month for the Cairn deal to be expedited. He said the 'deal faces unexpected regulatory hurdles, which are causing delay and could block the deal entirely'.

Cairn, which originally hoped to have what would be one of India's biggest takeover deals wrapped up by last December, needs New Delhi’s nod soon to complete the sale by April 15, when Vedanta's bid lapses.

Without it, Cairn will have to seek new approval from shareholders - which Gammell has refused to do even though Cairn wants the money to develop new oil fields in Greenland.

"I don't intend to go back to shareholders to extend the deadline," the oil entrepreneur, nicknamed Scotland's J.R. Ewing after the oil baron in the hit US TV show Dallas, said.

Kumkum Sen, a columnist for Business Standard newspaper, said the original royalty provisions must be upheld, warning changing the rules 'could be far-reaching'.

"The image that India is a nation where the rule of law prevails could be severely damaged," he said.

Vedanta's founder, billionaire Anil Agarwal, who has declared he wants to make his company an 'Indian natural resources champion', says he is looking forward to a 'positive outcome'.