The Civil Aviation Ministry has agreed to the proposal of allowing foreign carriers to buy 26% stake in private airlines, sources said.
Earlier the Aviation Ministry had proposed to fix a cap of 24% on foreign direct investment (FDI) by overseas carriers.
"They (the Civil Aviation Ministry) have come on board for 26% FDI," a senior government official said.
He declined to divulge the details.
The Department of Industrial Policy and Promotion (DIPP) had proposed 26% foreign direct investment (FDI) by foreign airlines into the domestic industry, in the backdrop of private carrier Kingfisher Airlines slipping into a severe debt crisis and several others facing resource crunch.
The Home Ministry and the Planning Commission have already supported the draft Cabinet note in this regard.
The Finance Ministry has also given the green signal to the proposal, with a rider that such investments should not violate Sebi's takeover code.
At present foreign investment of up to 49% is permitted in the aviation services like cargo handling but foreign carriers are not allowed.
The DIPP argument is that not much interest will be shown by foreign carriers unless they are given significant stake with a say in running the airlines.