In a major departure from the civil aviation ministry's stand on foreign direct investment, the Naresh Chandra Committee is all set to recommend 49 per cent foreign airline stake in domestic airlines and Air-India. The committee has said the investment should be through the automatic route.

The committee will also recommend raising the FDI cap from the current 40 per cent to 49 per cent. Official sources said the committee was of the opinion that the ministry's opposition to allowing foreign airlines on security grounds carried no weight, and suggested a security clause to enable screening of foreign airlines that evinced interest.

The committee felt it was unlikely that non-aviation companies would show interest in investing in airlines. Besides, the aviation sector is looking up internationally and there would be no dearth of foreign airlines wanting to invest in India.

The ministry had suggested to the committee that 26 per cent FDI should be allowed automatically and 23 per cent through the Foreign Investment Promotion Board route.

The ministry had said foreign airlines should be barred from investing due to security issues. The ministry has also been apprehensive that a foreign airline will exploit the domestic hub and spoke network of a domestic carrier and use this to generate traffic.

The committee has also suggested that both Indian Airlines and Air-India be privatised. No decision, however, has been taken on the equity to be offloaded.

The group of ministers on FDI in February this year had suggested that the FDI cap should be raised to 49 per cent from the current 40 per cent and that foreign airlines should be included in the cap.