Significantly, Prasad said industry minister Sikandar Bakht was in favour of clearing the Tata project. The committee would be set up by civil aviation ministry shortly and comprise "neutral" experts familiar with the project, Prasad said.

Civil aviation ministry sources said the experts from retired ministry and airline officials. Sources said Tatas would not be given any representation on the committee.

The civil aviation joint secretary, A P 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. The Tatas' proposed domestic airline plans to raise roughtly $ 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.

The Tata Airline 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 abides 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 directly or indirectly in any domestic airline.While the Tatas have clarified that Singapore Airlines, the original venture partner, will have no equity stake in the firm they have sought permission for technical collaboration with the airline.

The new policy permits an airline company to enter 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 -- American International Group (AIG) and the Government of Singapore Investment Corporation (GSIC) -- the Tatas have said that these details can be given only once the proposal is cleared.