According to the Ministry of Civil Aviation, continued support from the government had resulted in improvement of financial and operational performance of the airline.
The development comes after the Air India Specific Alternative Mechanism (AISAM), in a meeting last year, decided against divestment at that time due to issues like volatile crude oil prices and adverse fluctuations in exchange rates.
"However, continued support from the government had resulted in improvement of financial and operational performance of Air India. As per the recommendations of AISAM, the government will now go ahead with the process of disinvestment of the company," the Ministry said in a statement.
In December last year, the Centre had prepared a revival plan for the airline, comprising a comprehensive financial package and sale of non-core real estate assets.
The plan comprised of several major elements such as a comprehensive financial package including transferring of non-core debt and assets to a SPV (special purpose vehicle) and strategic disinvestment of subsidiaries.
Besides, the Centre infused Rs 2,345 crore into the financially strained national carrier under its 'Turn Around Plan'.
In addition, an inter-ministerial panel has decided to divest the government's stake in AIATSL.
The revival plan had come after government's efforts to off-load a majority stake in the airline failed. On May 31, 2018, "no response" was received by the government.
( With inputs from IANS )