The airline showed a massive loss last financial year
The Indian government has approved an injection of $173m (£110m) for the ailing national carrier Air India.
The instalment is part of an expected $432m ($277m) financial aid package for the company, which has reported massive losses in recent years.
The money would be paid out in two phases, officials said.
Last year, the airline agreed to restructure the company, cut costs amounting to £407m over two years and to boost its revenues.
The airline reported a loss of $875m in the fiscal year ending in March 2009.
Air India was told by the Indian government to cut costs dramatically as a condition of receiving the state aid.
Management plans to cut pay incentives resulted in huge protests and hundreds of Air India pilots went on strike in September.
The strikes were called off after the government intervened.