The Prime Minister?s Office (PMO) has asked the civil aviation ministry to first get a favourable comment from the finance ministry on the proposal seeking equity infusion of Rs 1,200 crore for state-owned Air India before listing it for the Cabinet agenda. The aviation minister Praful Patel is understood to have met the Prime Minister Manmohan Singh on Thursday to clear hurdles in the way of securing government fund for the airline.

?The PMO has asked to follow the procedure. How can the Cabinet take up an issue which does dot have the backing of finance ministry? The minister (Praful Patel) is expected to meet the finance minister Pranab Mukherjee to sort out the issue,? official sources told FE adding that the issue may or may not come for Cabinet Committee on Economic Affairs (CCEA)?s consideration on Friday.

Responding to civil aviation ministry?s proposal to release second tranche of fund for Air India, the finance ministry had earlier expressed its dissatisfaction over the airline?s ability to cut cost and improve revenue. The ministry had also noted that Air India had failed to reduce its annual wage bill of about Rs 3,100 crore and had appointed executives on fatter salary instead.

The home ministry had also not favoured the ministry?s proposal. The petroleum ministry, had, however backed the proposal with the rider that the airline would first clear off the oil marketing companies? dues of about Rs 1,800 crore.

?Since home ministry has not given any reason for not upholding the fund-infusion plan it does not have much significance,? the official said claiming that the money would soon be released to Air India.

Air India has been facing severe liquidity crunch and sitting on huge debt from banks and financial institutions. The airlines is estimated to have borrowed about Rs 40,000 crore (short and long-term) and finding it difficult to repay it.

The public sector airline is estimated to have an accumulated loss of over Rs 12,000 crore as on March 2010.

In a communication to the aviation ministry, the administrative government department, Air India had earlier this month said that it immediately needed Rs 3,000 crore of cash from the government to stay afloat.