A panel of top Indian bureaucrats has recommended allowing foreign airlines to invest in local carriers with a 49 percent cap on their holdings, Aviation Minister Ajit Singh said, providing a ray of hope to a sector that is facing a severe cash crunch, reported Dow Jones Newswires.

The recommendation, if implemented, may bring much-needed funds to carriers such as Kingfisher Airlines and Jet Airways, which are struggling under the weight of mounting losses and increasing costs.

The recommendation of the panel of secretaries is a step forward from the 26 percent stake proposed for foreign carriers recently by the Department of Industrial Policy and Promotion of the Ministry of Commerce & Industry.

Indian law currently allows up to 49 percent foreign direct investment in airlines, including by financial investors. Overseas carriers are barred from investing in the sector.

The proposal to permit foreign airlines has been circulating for nearly a decade, but the process has gained speed as local carriers sank deeper into the red due to increasing costs such as that of jet fuel, a depreciating rupee and high interest payments on their debt. Some carriers such as Kingfisher have been urging the government to change the rules.