"The issues related to the Bilateral Investment Promotion and Protection Agreement (BIPA) with the UAE will take own course. The government is finding ways to assure the UAE on investments in India. The deal could be finalised before BIPA takes shape," said sources in the ministry.
The deal would inject much-needed funds into Jet and help Etihad expand its reach into the vast Indian aviation market.
Etihad has been in talks for a 24 per cent equity stake in Jet, valued at around $300 million, ever since India relaxed ownership rules and allowed foreign airlines to buy up to 49 per cent in local carriers.
Earlier, aviation experts had said the deal would be delayed at least until August due to concerns of past failed forays by Gulf investors into India and the Abu Dhabi firm's demands to protect its potential investment.
There were issues relating to what happened to some other UAE entities such as Etisalat and Emaar in India.
Etisalat, the UAE's biggest telecom operator, shut down its Indian mobile operations after a court ordered the revocation of cellular permits - including those granted to Etisalat's local affiliate - following a scandal-tainted 2008 sale.
According to sources, apart from disagreements on commercial terms, an investment protection assurance sought by Abu Dhabi has caused a pause in talks.
"The deal has been delayed due to various considerations - pricing, management control and BIPA between both countries," said another source close to Jet Airways.
Top executives from Etihad and Jet met Indian ministers in February, but the deal faced a setback later when the Gulf carrier's chairman told Reuters it needed to be revised.
Etihad said later it remained in talks with Jet and has been strengthening its business relations with the Indian airline. The Gulf carrier paid Jet $70 million for its slots at London's Heathrow airport earlier this month and the two already have a codeshare agreement.
Jet shares have risen nearly 45 per cent in the last six months on speculation of an investment by Etihad. But the surge has slowed on concerns about the deal going through.
Etihad has negotiated stake purchases in four foreign airlines including Air Berlin, Virgin Australia, Aer Lingus and Air Seychelles.The airline is expanding quickly as it looks to compete with regional rivals Emirates and Qatar Airways.