The board has given the civil aviation ministry four weeks' time to seek clarification from the Tatas on whether their domestic airline project conforms to the new civil aviation policy guidelines.

Industry sources pointed out that the Tatas may have to clarify that foreign airlines do not have shareholding in the foreign institutional investors (FIIs) which are to pick up 40 per cent stake in the Tata Airline project.

"Basically, the Tatas will have to supply details of the FIIs and their shareholdings to the government" said an industry source. The aviation ministry could, however, bring the proposal to the board even before the four-week time period once it has assessed the venture in the light of new guidelines, the sources said.

The fresh civil aviation policy guidelines make it clear that foreign airlines will not be permitted to invest directly or indirectly in thedomestic aviation sector. The guidelines were issued on Friday, just a day before the Tata Airline proposal was to be considered by the FIPB.

The Tata Airline proposal envisages a Rs 417-crore investment by Tata Industries and domestic investors. The remaining 40 per cent stake in the airline will be picked up by FIIs, which will pump in Rs 278 crore in the airline. The total equity component will amount to Rs 695 crore.

The airline plans to start with a fleet of seven aircraft which will contain a mix of small and large aircraft. The airline will fly to 12 destinations in the first year of operation, increasing these to 21 in the second year.

The foray of the Tatas into aviation has run into several airpockets. The Tata Airline proposal was given a green signal by the FIPB in January this year. However, the BJP government decided to review all the major projects including Tata Airline's which was cleared by the caretaker UF government.

Prior to this, the Tatas had tied hands with Singapore Airlines(SIA) to float a joint venture domestic airline. Though the project got the FIPB nod, it was shot down when the Deve Gowda government barred foreign airline investment in domestic airlines. The project had met with strong opposition from former civil aviation minister CM Ibrahim.

The Tata-SIA project had also been opposed by the public-sector Indian Airlines (IA) and the private-sector Jet Airways. The two airlines, which together share a major portion of the domestic market, had lobbied hard to prevent the project from getting cleared.

Even with the revised Tata Airline proposal, which has a modest investment programme compared to Tata-SIA, IA and Jet Airways expect an adverse impact on their market share and profitability.

The FIPB had cleared the Tatas' proposal to start the airline with a 40 per cent foreign equity holding in January this year though it was later shot down by the Cabinet Committee on Foreign Investment.