The finance ministry is planning to pump an extra Rs 325 crore (Rs 3.25 billion) as additional equity in Indian Airlines, bringing it a step closer to expanding its fleet.

The civil aviation ministry is also pushing for a letter of comfort from the finance ministry to facilitate the airline's Rs 10,089 crore (Rs 100.89 billion) aircraft purchase deal.

The change in the finance ministry's stand follows a recent proposal by the civil aviation ministry to the Cabinet to take Indian Airlines off the divestment list.

Government officials said the Rs 325-crore (Rs 3.25-billion) equity infusion would bolster the cash-strapped airline's creditworthiness. Indian Airlines' equity base now stands at Rs 105 crore (Rs 1.05 billion). The equity infusion will take place by May.

Indian Airlines executives said the airline would raise 90-95 per cent of the fleet expansion cost from the market. The carrier had raised similar debt for its 1993 aircraft purchase deal.

Exim Bank is expected to facilitate the funding if Boeing bags the order. A consortium of European financiers like the European Credit Agency could step in if Airbus wins the account.

Indian Airlines' fleet expansion was held up because it was slated for divestment. The civil aviation ministry wrote to the Cabinet last month that Indian Airlines and Air-India be taken off the sale list.

Indian Airlines' board had in March 2002 approved the acquisition of 43 aircraft for Rs 10,089 crore (Rs 100.89 billion). The board had suggested that the Airbus A-320, A-319 and A-321 fit the carrier's requirements.