The Cabinet is likely to take up on Wednesday the issue of hiking the foreign direct investment ceiling in the telecom sector from 49 per cent to 74 per cent and in domestic private airlines to 49 per cent from 40 per cent. Foreign airlines, however, will not be allowed to invest in domestic airlines.

"The proposal to raise the FDI caps will be considered by the Cabinet. But the plan to allow foreign airlines to invest in domestic carriers has been dropped," said a government official.

The civil aviation and finance ministries were at loggerheads over allowing foreign carriers to invest in domestic airlines.

The civil aviation ministry had opposed the move, saying such investments would not lead to any value addition in the operations of domestic carriers. The ministry was also of the view that the move could provide a backdoor entry to foreign carriers in the domestic market.

The Cabinet is also likely to consider a proposal to write off Vayudoot's Rs 183 crore (Rs 1.83 billion) losses. This will come as government assistance on account of Vayudoot's merger with Indian Airlines.

A policy for the leather sector is also likely to be taken up in the meeting.