The Cabinet on Wednesday cleared the proposal to hike foreign direct investment limit in civil aviation sector from 40 to 49 per cent, official sources said.

According to a note submitted by the civil aviation ministry, the hike in FDI limit was part of the proposals made by Finance Minister P Chidambaram in his annual budget for 2004-05, the sources said.

While pegging the plan outlay for the sector at about Rs 1,621 crore (Rs 16.21 billion), a hike of about Rs 135 crore (Rs 1.35 billion) from the revised estimate for the last fiscal, the government had said there was an 'urgent need' for infusing huge amounts of capital in this sector, they said.

The proposal to hike the FDI cap had seen protests from the Left parties, extending crucial outside support to the United Progressive Alliance government.