The long-running £1.4bn tax spat between India and telecoms giant Vodafone is on the cusp of settlement, according to the country's finance minister.

The expected deal is a direct result of the Indian government's efforts to repair the damage to international investor confidence.

Palaniappan Chidambaram said that he was "confident" Indian authorities would be holding a third round of talks with the British company to break the deadlock.

He said Vodafone had written to the government in a bid to engage senior government officials to thrash a way out of the problem.

One figure close to the company said Chidambaram was playing up the possibility of a deal, but another said the atmosphere in talks between Vodafone and the Indian government had clearly changed in recent weeks.

The global mobile phone operator has been embroiled in a legal spat with the Indian tax authorities, who are seeking tax for Vodafone's purchase of Indian interests of Hong Kong-based Hutchison Group through a Cayman Islands holding company in 2007. At the time the deal cost $11.2bn (£6.9bn).

Last year, a landmark Supreme Court ruling backed the company's claim that no tax was due.But in May, the Indian government reopened the divisive wound by amending legislation to allow retrospective tax claims relating to historic deals struck by international businesses with Indian subsidiaries, including Vodafone.

Analysis by legal experts, point to a potential deal that might see the Indian authorities dismissing the interest and penalty element of the tax charge, while accepting a lesser sum for the main payment.

While the UK telecoms group is adamant that no tax is payable, it hopes to move things forward with an initial public offering of part of its Indian business - put on ice while the thorny issue of the tax case is resolved.

Whatever the outcome of the Vodafone deal will be watched closely by the global investor community as its implications may impact on other Indian court cases that hinge on cross-border deals with multinationals with Indian subsidiaries, such as General Electric and brewing giant, SAB Miller.

Vodafone declined to comment.