India will approve plans by two state-owned airlines to buy new planes only after it decides whether or not to sell part of its stakes in the carriers, the civil aviation minister said on Tuesday.

The government aborted plans to sell stakes in Indian Airlines Ltd, the country's largest domestic airline, and international flag carrier Air-India Ltd in 2001, after a lack of interest from investors.

Since then, both companies have drawn up ambitious plans to renew their ageing fleet and battle growing competition.

"First, the CCD (Cabinet Committee on Divestment) will need to decide whether the two airlines will be disinvested or not. Only then can we proceed with the purchases," Syed Shahnawaz Hussain said.

Hussain said the civil aviation ministry had already sent the proposal to the CCD to take the two airlines off the list of companies to be sold, and expected the matter to be discussed at its next meeting.

He said the airlines were unlikely to attract much interest given the current downturn in the global aviation industry, hit by weak economies and the impact on September 11, 2001 attacks on the United States.

Indian Airlines approved a plan last year to buy a mix of 43 Airbus A319, A320 and A321 planes at a cost of $2.1 billion as part of a plan to renew its 58-plane fleet. It has been awaiting government approval for several months.

Air-India, which has 30 planes, is in the midst of selecting a supplier for 17, 250-seat, long-haul jets, for which Airbus A340 and the extended range version of the Boeing 777-200 are competing.

Air-India has completed a technical evaluation of these planes and is now considering financial bids for them.

Hussain said the government was likely to consider purchase deals of both firms together, but did not say when it might give its blessing.

The government will give Indian Airlines 3.25 billion rupees to help it buy the planes while Air-India will fund the purchases through suppliers' credit and loans.

Hussain said the new planes would help boost Air-India's market share to 24.6 per cent from 18.4 per cent now. Air-India will phase out six Boeing 747-200 and 300 planes after its purchases.

It plans to begin flights to Los Angeles, Manchester, Toronto, Sydney, Mauritius and Johannesburg, Hussain said.