Plans to sell of Indian Airlines have also hit the buffers

By Jyotsna Singh BBC correspondent in Delhi

The Indian cabinet has decided to allow domestic private airlines to fly across the seven south Asian nations.

India's state-run Indian airlines and Air India will also operate daily flights to the ten -member south east Asian grouping, Asean.

The decision is being seen as a major boost to the country's civil aviation sector and will enhance tourism and bilateral trade with these nations.

The civil aviation minister Rajiv Pratap Rudy told a press conference in Delhi that Air India and Indian airlines will be allowed to operate daily flights to Asean airports from the four major cities, Delhi, Mumbai, Calcutta and Madras.

India has allowed Asean countries to fly to 18 tourist destinations in the country, on the basis of commercial agreements with these countries.

Green light

The proposals have been cleared after an announcement made by Indian prime minister Atal Behari Vajpayee during the second Indo-Asean summit in Bali.

Daily flights have also been permitted to Sri Lanka from Hyderabad and Bangalore in addition to the other four other major cities.

The cabinet gave the go-ahead to fly domestic private carriers to fly to the south Asian nations grouped together under SAARC (South Asian Association for Regional Cooperation).

Under a SAARC agreement India is allowed to fly 88 flights to various SAARC destinations.

But the state-run Air India and Indian Airlines were only able to fly 30 flights.

Sell-off

The decisions have been welcomed by private airline companies as a wonderful opportunity to expand business. The move will also fuel the demand for new aircraft.

Civil Aviation Minister Mr Rudy said a more comprehensive civil aviation policy is expected by January next year on the basis of recommendations made by a government committee.

The committee headed by former bureaucrat, Naresh Chandra, has recommended that foreign airlines be allowed to pick up 49% equity in the country's aviation sector.

The government has in the past disallowed equity holdings by a foreign airline in the aviation sector for security reasons.

The recommendation, if approved, would allow investment in India's two private domestic airlines, Sahara and Jet, as well as new airlines but not in state-run international carrier Air India or its domestic partner, Indian Airlines.

The committee also recommended that both Indian Airlines and Air India should be privatised, to open the way for foreign investment.