India is considering relaxing rules for foreign direct investment in the civil aviation sector, a move that could enable it to find a buyer for ailing flag carrier Air India, as well as Jet Airways, which suspended all flight operations in April, The Economic Times has reported.

Presenting the country's annual budget on July 5, Finance Minister Nirmala Sitharaman also announced that the government would continue to press ahead with the divestment of various public sector enterprises including Air India.

In a previous privatisation attempt in 2018, which failed to lure any bidders, the government opted to retain a 24% stake in the flag carrier. This was believed to be one of the reasons it did not generate any interest. The government now intends to sell the carrier in its entirety, and relaxing FDI rules may interest buyers further.

However, there has been no clarity on the civil aviation rules' Substantial Ownership and Effective Control (SOEC) clause, which bars foreign carriers from taking majority control of airline and stipulates that two thirds of the members of the board must be Indian.

Also in the budget was a pledge to make India an aircraft leasing hub, for which the Ministry of Civil Aviation has set up a committee, including airlines, to make Ahmedabad’s Gujarat International Finance Tec-City (GIFT) special economic zone the location for the venture. A tax rebate for the country's MRO sector was also announced in the budget.