It, however, did not take any decision and would meet again shortly to take up various issues.
Civil Aviation Minister Hardeep Singh Puri termed the meeting productive and said that all the decisions on disinvestment would be taken in a defined period of time.
Among many issues on the meeting agenda were transferring more debt, over and above Rs 29,464 crore decided earlier, to Air India Assets Holdings Ltd (AIAHL) to make the deal attractive for private parties.
The ministerial panel, which includes Finance Minister Nirmala Sitharaman, Commerce and Railway Minister Piyush Goyal and Civil Aviation Minister Hardeep Singh Puri is learnt to have taken up staff issues in the wake of privatization.
"Many queries were raised. The Aviation Ministry will respond to them in the next meeting," an official source said.
The government is planning to issue Expression of Interest (EoI) by October-end.
Learning from previous experience when its bid to divest 76 per cent in the airline failed with no private firm showing any interest, the government is this time expected to relax eligibility criteria for the potential bidders. It has decided to offload almost its entire 100 per cent stake in the ailing carrier.
The government may also further relax the FDI rules to allow foreign investors to take pilot's seat in management. But several officials spoke to said that the deal can not be sweetened beyond a limit.
"The government is trying to sweeten the deal. But it can not sweeten it so much that there is diabetes! Because then, CBI, CVC and CAG would come into the picture," an official said.
On time-frame for disinvestment, he said the whole process will take its own reasonable time. It can happen in a few weeks only if the government has extensively worked on the plan in the past 4-5 months, he added.
While the investor sentiment remains tepid and finding a buyer could be difficult, aviation experts said the airline would be sold off this time given that government is going all-out for it and willing to negotiate further with potential bidders.
"The government is very serious this time. Whatever they will have to do they will to. They are open to further negotiation with potential buyers. When any government is serious, they manage to do things," said Rajan Mehra, CEO of Club One Air and former India head of Qatar Airways.
Loss-making Air India has been surviving on taxpayer's money. It has managed to stay afloat for the last few years on a Rs 30,000-crore bail-out plan cleared by the UPA-II government in 2012.
The airline has a total debt of about Rs 60,000 crore which includes long-term as well as short-term working capital loans.
( With inputs from IANS )