New Delhi, Aug 14 - The civil aviation ministry has sought the cabinet's nod for Air India to float tax-free bonds worth Rs.5,000 crore ($1 billion) and fresh equity from the government to fund its fleet expansion plans and other expenses.

The ministry said the bonds were necessary for the ailing state-run carrier, struggling to stay afloat after having accumulated losses worth $2 billion, to meet its expenses during the ongoing five year plan that ends 2011-12, officials said.

The airline currently has an equity base of Rs.145 crore (less than $30 million) and the fresh equity infusion has been sought to ensure that interest paid on some high-cost debt can be lowered, the officials added.