India bars foreign carriers from buying into Indian airlines, but foreign investors are allowed to invest up to a cumulative 49 percent stake.

The question was to allow other airlines to participate in FDI. I discussed it with the finance minister and he agreed, Civil Aviation Minister Ajit Singh told reporters.

We will move the note to the cabinet now.

Shares of Indian airlines surged by 7 to 12 percent ahead of the meeting of a group of ministers in New Delhi.

India's loss-making airlines are grappling with high jet fuel prices, low fares, and an economic slowdown.

A decision to open up the sector to foreign carriers would be a lifeline to domestic carriers, notably debt-laden Kingfisher Airlines.

All but one of India's six main airlines are loss-making as they engage in aggressive price competition.

Indian airlines are expected to lose up to $3 billion in the fiscal year that ends in March. State-owned Air India, operating on government life support, is expected to account for more than half of that, the Centre for Asia Pacific Aviation has said.

We realised that FDI is one of the factors that will help the industry survive the current financial problems, Singh said.

Ahead of the announcement, shares of Jet Airways India's leading airline, closed up 10.3 percent.

Budget carrier SpiceJet, whose CEO has said his airline would evaluate selling stake to a foreign carrier if the government were to change FDI rules, rose 10 percent. Kingfisher ended up 4.8 percent.

Despite heavy losses, domestic air traffic increased 17.6 percent to 55 million passengers in the first 11 months of 2011, government data shows.