Official sources however said that "the proposal may be taken up before August 8 if the civil aviation ministry gives its consent on the application before that".

At a meeting held on Saturday, the administrative ministry sought more time on the grounds that it was still examining whether the proposal conformed to the recently-announced guidelines.

The FIPB has set a deadline of August 8 for completing this process. It is expected that the ministry would seek more details from the Tatas.

The deferment has come as a big disappointment for the Tatas as they were hopeful of it being cleared after having provided information about its foreign partners last month.

Resident director of the Tatas, Sujit Gupta, described the decision as "disappointing" since the company had already given details of the proposal to the civil aviationministry following a four-week deferment by the FIPB on June 13.

"We believe we gave all clarifications sought by the ministry on time and repeatedly emphasised that our policy was conforming to the guidelines", Gupta said.

A decision on the Rs 1,475-crore proposal was deferred by the FIPB on June 13 as the board wanted to know whether the application conformed to the recently-announced guidelines.

The Tata proposal has done the rounds of the FIPB several times before and in different forms. The application has become more controversial with 50-odd members of parliament from various parties writing to the prime minister last week against granting approval.

The FIPB sought details of the shareholding pattern of the foreign institutional investors (FIIs) which would pick up a 40 per cent stake in the proposed airline.

It also wanted details regarding the foreign investment in the proposed company. The aviation policy disallows indirect holding by foreign airlines.

Consequently, Tatas revealed theidentity of the foreign partners who have been offered 40 per cent equity: American International Group (AIG) and Government of Singapore Investment Corporation (GSIC).

In a letter to the FIPB chairman, the Tatas disclosed that AIG and GSIC are interested in picking up equity in the airline. The letter reiterated that there will be no equity participation by any foreign airline in the venture.

It mentions that the company has reached an in-principle agreement with Singapore Airlines for providing technical services. The details regarding the scope of technical agreement and the fee to be paid have also been stated by the company.

The letter specifies that the technical tie-up will only be in areas of establishment engineering and maintenance infrastructure, flight operations and airline systems and procedures as stipulated in the policy. The Tatas had put in an application to the FIPB for the airline project in December, 1997. This application proposed a tie-up with Singapore Airlines directly, whichwas later dropped as the policy announced by the UF government disallowed foreign airlines from picking up equity in a domestic airline.

This is the fourth government to have scrutinised the project, which has passed through the decision-making process of Narasimha Rao, Deve Gowda, IK Gujral and AB Vajpayee governments, and yet failed to spark off a decision.

The Tatas, in a recent letter, gave a very categorical reply on where they stood in respect of these new clauses in the aviation policy - they said, for the second time in six months, that they would conform. To cite specifics: they replied that no foreign airline (or company in which an airline had a stake) would be investing in their joint venture, and that they would conform to other guidelines such as those on leasing aircraft and the composition of the airlines board once their proposal was cleared.

(Incidentally, all these fears arise from the time that Singapore Airlines was a partner in the proposed Tata Airline, but the Tatas droppedSingapore Airlines from the joint venture in December, 1997.)

In fact, not only did the Tatas communicate their decision to drop Singapore Airlines in December, 1997, they wrote to the aviation ministry saying that their airline would not have any foreign airline equity, either directly or indirectly. In other words, even when the new guidelines were announced on June 11 this year, the Tata proposal conformed to it as far as the relevant aspects were concerned - namely, that no foreign airline would hold either direct or indirect equity in it.

The civil aviation ministry, however, for reasons best known to itself, had told the FIPB when the Tata proposal came up before it on June 13, that it needed a month to see if the proposal conformed to the new guidelines.