Top sources in the civil aviation ministry said, "The government is considering several aspects of disinvestment in Air India. One of the plans is the setting-up of an inter-ministerial group which will examine the role and scope of the airline which will partner AI."

The inter-ministerial group is expected to consist of officials from the finance ministry, the ministry of civil aviation and the public sector enterprises board.

Meanwhile, the civil aviation ministry is laying the ground-work for a cabinet note on AI disinvestment. Sources said that there are differences between the civil aviation ministry and the finance ministry over the Government's ability to prop-up theMaharajah. The aviation ministry is in favour of a Rs 1000-crore equity infusion by the government in AI as recommended by the disinvestment commission.

However, the finance ministry, it is reliably learnt, feels that AI should first raise money by selling-off the Hotel Corporation of India (HCI). The finance ministry feels that the government may not be able to make a Rs 1000-crore equity infusion.

The government has already committed itself to a Rs 325 crore equity infusion into Indian Airlines, the other public sector airline. It is felt by finance ministry mandarins that an additional Rs 1000-crore burden for AI cannot be borne by the Government at this time.

The disinvestment commission had recommended that along with an equity infusion by the government, the strategic partner can pump-in Rs 770 crore in the loss-making airline. The strategic partner may be an individual airline or consortium of airlines. Once the equity infusion is complete, the Government may then disinvest 10 per cent of theequity in favour of financial institutions and 10 per cent in favour of the public or the employees.

The final equity structure of AI after disinevstment will emerge as an equal partnership between the Government and the strategic partner with each holding 40 per cent stake. The total equity base of AI will be Rs 1924 crore.