The government is close to appointing an arbitrator to replace R C Lahoti, who had declined to arbitrate on its behalf in the Rs 20,000 crore tax case with UK telecom major Vodafone.

"We are in the process of finalising a replacement for Justice Lahoti. We are waiting for a final nod from the minister for the government nominee on the panel," a senior official said.

The final call would be taken by minister of state for finance Jayant Sinha, he added.

The government had in June 2014 appointed former Chief Justice of India R C Lahoti as arbitrator in the tax dispute case. However, in May 2015 Lahoti recused himself from the arbitration process.

Vodafone has already named Yves Fortier of Canada as its nominee on the panel.

The government and Vodafone had earlier this year decided on the third arbitrator, who will act as chairman of the tribunal, for the case. However, Abdulqawi Ahmed Yusuf of the international court of justice declined to be part of the three-member panel.

After India finalizes on its nominee on the panel, both the arbitrators would scout for a neutral judge and only then the arbitration proceedings would start.

Following an international arbitration notice by Vodafone, the previous UPA government in May 2014 withdrew its conciliation offer to settle the tax dispute.

Earlier, the government had approved the conciliation with Vodafone in June 2013 in a bid to resolve the capital gains tax dispute.

While the basic tax demand was Rs 7,990 crore, the total outstanding, including interest and penalty, is estimated to have risen to Rs 20,000 crore.

The Supreme Court had ruled in Vodafone's favour in 2012, saying the company was not liable to pay any tax over the acquisition of assets in India from Hong Kong-based Hutchison.

The government, however, amended the tax laws with retrospective effect to undo the Supreme Court judgment and claim taxes.