The government of India has agreed to move all of the non-aircraft debt of Air India (AI, Delhi International) to a special purpose vehicle (SPV) ahead of a planned privatisation, in a bid to make the deal more lucrative. The Economic Times quotes an unnamed aviation ministry official as saying that the committee leading the national carrier's sale made the decision on August 30.

"The airline will be sold only with aircraft debt on its books. This will make the airline a much more lucrative proposition," the official is reported as saying.

According to the official, the government will assume ownership of Air India's assets, which will then be leased to the carrier.

Previously, the Aviation Minister Ashok Gajapathi Raju had hypothesised that the government taking on Air India's debt in this way could be a good move, but the Economic Times article suggests that the decision had already been made when Raju made his comments. At that time, the minister also suggested separating out the carrier's non-aviation assets, such as its property holdings.

Hoping to maximise interest in the sale of Air India, the government also plans to amend foreign direct investment regulations that prevent foreign ownership of greater than 49%.

Air India has been suffering from mounting debts and poor management for several years, and is currently surviving on government bailouts ahead of its planned disinvestment.