The civil aviation ministry has sought the cabinet's nod for Air India to float tax-free bonds worth Rs 5,000 crore ($1 billion) and fresh equity from the government to fund its fleet expansion plans and other expenses.
The ministry said the bonds were necessary for the ailing state-run carrier, struggling to stay afloat after having accumulated losses worth $2 billion, to meet its expenses during the ongoing five year plan that ends 2011-12, officials said.
The airline currently has an equity base of Rs 145 crore (less than $30 million) and the fresh equity infusion has been sought to ensure that interest paid on some high-cost debt can be lowered, the officials added.
They also clarified that these issues will be considered by the cabinet separately and will not be a part of the mandate to be given to a high-powered ministerial group that Prime Minister Manmohan Singh intends to set up to look at the issue of high aviation fuel prices.
Air India has been pursuing an ambitious fleet expansion plan for the past few years to induct as many as 111 new aircraft, orders for which were placed with both the US-based Boeing and the European Airbus Industrie.
The airline's current fleet size is 152 aircraft.