The cabinet will decide on Jet Airways Ltd's proposal to sell shares worth 20 billion rupees ($432 million) to foreign institutions, the finance ministry said in a statement on Tuesday.
Jet, the country's No.2 airline by market share, is looking to raise up to $400 million to reduce its debt.
As the proposed investment was higher than the 6-billion-rupee limit that the regulatory authority on foreign investments can give clearance to, the matter was referred to the Cabinet Committee on Economic Affairs.
With a net debt of $3.1 billion on its books, about $500 million of that for its unit Jetlite, and a debt-to-equity ratio of 4 to 1 at the end of the September quarter, the company has to raise funds to deleverage its balance sheet.
Indian airlines are reeling under mounting losses as demand waned in the wake of the financial crisis last year and high operating costs force them to look at fund-raising options.
The carrier's September quarter net loss widened to 4.07 billion rupees from 3.8 billion rupees a year ago on lower revenues.
The government approved 17 foreign investment proposals worth 11.59 billion rupees ($250 million), the ministry statement added.