In a move that will smoothen the proposed merger of Indian and Air India, the Finance Ministry has indicated that it would consider favourably the request of the Ministry of Civil Aviation to provide income-tax relief under section 72 A of the Act for the proposal.

The provision deals with carry-forward and set-off of accumulated losses and unabsorbed depreciation in amalgamation or demerger cases.

Both Air India and Indian have accumulated losses on their balance sheets.

"The proposed I-T relief will apply only to the merger of Indian and Air India and will not be applicable to the merger of other airlines in the domestic sector as yet," a senior Government official said.

Meanwhile, at the first meeting of the Group of Ministers on Monday, divergent views emerged, though no one explicitly opposed the merger.

According to sources, a senior Cabinet Minister said that what was being planned was not a merger but integration of the two airlines to create a behemoth that would face problems on several fronts, including human resources.

Another Minister is said to have questioned the timing of the proposed merger.

However, the Planning Commission is said to have come out strongly in favour of the move after the economic rationale was explained at the meeting.

Emerging from the meeting, the Minister for Civil Aviation, Mr Praful Patel, had admitted that several issues were yet to be addressed.

However, he added that there were no dissensions at the meeting.

Meanwhile, the process for setting up a Committee of Secretaries has begun.

The committee would look into various issues raised at the meeting and report back to it within two weeks.

The Cabinet Secretary is expected to constitute the panel soon, sources said.

The proposed merger would provide a host of benefits including giving the new entity a combined fleet strength greater than that of Emirates or Singapore Airlines.