The proposed aid would include an equity infusion of 199 billion rupees into the loss-making carrier and 112 billion rupees for aircraft projects, including purchases and maintenance, the report shows.

The report says the total debts of India’s airlines are expected to rise to $20 billion in 2011/12 ending March as they struggle with rising oil prices, high sales taxes on jet fuel and below-cost pricing driven by fierce competition.

State-owned Air India, which is burdened with a debt of $4 billion, said on Thursday its board had approved issuing 75 billion rupees worth of shares to its lenders as part of its financial restructuring.

A consortium of Air India’s lenders last month gave broad approval to its financial restructuring, a source previously said.

Air India is expected to account for more than half of the projected total losses of $3 billion for Indian airlines in 2011/12, the Center for Asia Pacific Aviation has said.

Domestic air passenger traffic is expected to grow by 12 percent a year until 2017, the working group report shows.

The aviation ministry also proposes to spend 175 billion rupees on the development of airports, the report shows.