Oil and Natural Gas Corporation will invest about $730 million in Cairn India's main Rajasthan oilfields despite the project offering negative returns.

The board of ONGC has approved its 30 per cent share of the $2.431 billion revised field development cost proposed by Cairn India for the Block RJ-ON-90/1, petroleum minister Murli Deora informed the Rajya Sabha on Monday.

ONGC will invest $729.43 million.

"Under the existing set of fiscal terms and conditions, ONGC has negative net present value for its investment in the revised field development plan," he said.

The project offers negative returns to ONGC as the firm is liable to pay royalty on the entire crude oil production from the Rajasthan fields despite having just a 30 per cent share.

Deora, however, did not say if the government will reimburse ONGC for the royalty the firm will pay in excess of its share.

ONGC says that its board had approved the revised cost on the assurance that the excess royalty paid will be reimbursed.

Deora said Cairn's Rajasthan fields would produce 2.6 million tonnes of oil in 2009-10 and 6.8 million tonnes in 2010-11 with a peak output of 8.9 million tonnes the following year.