The government may provide flag carrier Air India up to Rs 2,500 crore in the absence of funds from the market route, to help it stay in the skies right through the global financial crisis.
"It is owned by the government and as like any owner of a company, government should be ready to infuse liquidity into it. Air India has a very small liquidity base of Rs 145 crore and with an estimated aircraft of Rs 40,000 crore it is absolutely unacceptable.
"There is need to infuse further liquidity to make Air India a viable entity," Civil Aviation Minister Praful Patel told reporters in Hyderabad.
The 77-year-old airline, which initiated a fleet renewal programme three years ago and merged with its sister airline Indian last year, has proposed infusion of Rs 1,000-1,500 crore of equity capital.
It is also looking for soft loans to the tune of Rs 1,000 crore from the government that can be repaid over a period of time.
The airline like its private sector competitors has been facing a drop in traffic, especially premium air travellers - a fallout of the global economic slowdown.
Asked about plans for the Air India IPO, Patel said there is no discussion on public listing and that there was "no point in talking about that at this juncture."