The government said high oil prices, rising interest rates hurt the sale's prospects.

Government clarified on Thursday that plans to sell debt-laden state-run carrier Air India were still on track, hours after a junior minister told parliament the privatisation was on hold because of high oil prices and volatile exchange rates.

Government failed last year in its attempt to sell a 76 per cent stake in loss-making Air India due to a lack of interest from bidders, but said it would return with an alternative proposal soon.

The government injected Rs 3,975 crore ($576 million) into the airline in the fiscal year that ended March 31 and hived off some debt and the Ministry of Civil Aviation said on Thursday that the carrier was ready for sale.

"Continued support from the government (has) resulted in improvement of (the) financial & operational performance of Air India... the government will now go ahead with the process of disinvestment of the company," the ministry said in a statement.

It issued the statement to correct comments earlier in the day by the country's junior civil aviation minister, who told parliament conditions were still not right to attempt another sale.

"The present environment is not conducive to stimulate interest amongst investors for strategic disinvestment of Air India in the immediate near future," Hardeep Singh Puri said, adding that the government would revisit the sale once global economic conditions become more favourable.

A spokesman for the Ministry of Civil Aviation said the confusion stemmed from Mr Puri referring to a report from last year and stressed the sale plan was still on.

Aviation sector is facing turmoil with one of its biggest private carriers, Jet Airways, facing bankruptcy, while passenger growth in the market overall has slowed.

Potential bidders for Air India last year suggested they found some of the stake sale terms too onerous, making it a non-starter. The government said high oil prices, a weaker rupee and rising interest rates hurt the sale's prospects.

Prime Minister Narendra Modi's government has since hived off a part of the airline's debt, about Rs 30,000 crore, into a separate entity and is trying to sell off some of its assets and subsidiaries, such as the ground-handling unit, piecemeal.

"The government has prepared a revival plan for Air India which includes a comprehensive financial package," Mr Puri said, adding it would focus on increasing revenue and reducing costs.

Air India is expected to report a loss of more than Rs 7,600 crore for the year that ended in March 2019, Mr Puri told parliament.