Speaking to The Financial Express, FIPB chairman and industry secretary TR Prasad said, "The civil aviation ministry asked us for more time as it is setting up an expert committee to study the objections raised by some members of parliament (MPs) and certain trade unions against the airline proposal".

Significantly, Prasad said industry minister Sikandar Bakht was in favour of clearing the Tata project.

The committee would be set up by the civil aviation ministry shortly and comprise "neutral" experts familiar with the project, Prasad said.

Civil aviation ministry sources said experts would be retired ministry and airline officials. Sources said the Tatas would not be given any representation on the committee. Civil aviation joint secretary AP Singh represented the ministry at the FIPB meeting. The finance secretary, Vijay Kelkar, did not attend the meeting though his comments were forwarded to the board. This is the fourth time that the FIPB has deferred a decision on the airline project. The Tatas' proposed domestic airline plans to raise roughly $80 million, which is 40 per cent of the equity base of Rs 690 crore from foreign institutional investors (FIIs). It will initially have a fleet of seven aircraft.

The new aviation policy permits FIIs to hold a 40 per cent stake in domestic airline companies.

Tata airlines' proposal was taken up last on August 11 but was deferred on the request of the civil aviation ministry which sought some more time for giving a formal approval. The ministry wanted to confirm whether the proposal abided by the new aviation policy announced on June 12 this year. The proposal has been hanging fire for quite some time.

The policy forbids equity participation by foreign airlines either directly or indirectly in any domestic airline.

While the Tatas have clarified that Singapore Airlines, the original joint venture partner, will have no equity stake in the company, they have sought permission for technical collaboration with the airline.

The new policy permits an airline company to enter into code-sharing, interlining and ground-handling arrangements with other airlines as long as it is not a management contract. The Tatas have also been asked to define clearly as to which of these technical collaborations will be included in its agreement with SIA.

While the ministry has asked for the exact details about the distribution of equity holding by the FIIs in Tata Airlines i.e. American International Group (AIG) and the Government of Singapore Investment Corporation (GSIC), the Tatas have said that these details can be given once the proposal is cleared.