The Finance Ministry on Wednesday gave its approval to the proposal that seeks to allow foreign airlines to buy up to 49 per cent stake in Indian carriers, most of them are cash-starved.
"The ministry has given its approval to the proposal to allow foreign airlines to hold up to 49 stake in Indian carriers," a senior ministry official said.
The final decision on the proposal rests with the Union Cabinet, chaired by Prime Minister Manmohan Singh.
A Cabinet note in this regard has been moved and the Cabinet is likely to take a decision on it "soon", another official said.
India now allows foreign investors to buy up to 49 per cent stake in domestic airlines, but foreign carriers are not permitted to hold stake in Indian carriers.
The cash-crunch domestic airlines are facing several problems, including rising fuel prices and strong competition.
Accepting a major demand of the cash-strapped aviationindustry, the Ministry of Commerce and Industry had moved the Cabinet note in this regard.
The debt-laden Kingfisher Airlines is strongly pitching for approval to foreign airlines to invest in domestic carriers.
India's civil aviation sector grew at 18.5 per cent in the last seven years and the government has taken various steps to resolve the woes faced by the airline industry, the Economic Survey for 2011-12 had said.