The ailing national carrier has also sought a discount on payments on the lines the oil marketing firms give to private players which are on a cash-and-carry mode.
The decision to ask the oil companies to defer the March 29 deadline by another month was taken at a meeting of a Committee of Secretaries, chaired by Cabinet Secretary K M Chandrasekhar.
The meeting was attended among others by Civil Aviation Secretary Nasim Zaidi, Air India CMD Arvind Jadhav and officials from the Ministries of Petroleum, Defence and External Affairs.
While Air India has been paying a whopping sum of Rs 13.5 crore a day for all its aircraft to fill jet fuel, the oil companies have been seeking a hike of Rs five crore per day due to the rising crude prices.
Jadhav is understood to have made a presentation at the meeting, giving detailed financial position of the airline as well as making a case for discounts for paying cash upfront to pick up fuel.
The oil marketing companies could pay up to Rs 4,800 per kilolitre of aviation turbine fuel to Air India on account of the amount it has been paying on a daily basis, since the cash-and-carry system was imposed on it from December seven last year.
The meeting is believed to have asked the oil firms to work out this concession during the next few weeks.
Another issue which is understood to have come up for discussion was the payment of dues of about Rs 450 crore by the government to the ailing national carrier.
While Rs 344 crore is owed to Air India by the Prime Minister`s Office and the Ministries of Defence and External Affairs, the airline should be getting another Rs 106 crore from the government on account of relief and evacuation flights like those recently mounted to Libya.
The issue of these payments would also be worked out soon to provide some relief to the airline, sources said.
Air India is already burdened with a debt of Rs 40,000 crore and is grappling hard to mop up funds to keep the company afloat.
It has incurred a cumulative loss of over Rs 13,326.86 crore since its merger with Indian Airlines in 2007 at the close of financial year 2009-2010. Before merger, the losses reported by erstwhile Air India and Indian Airlines were Rs 447.93 crore and Rs 240.29 crore respectively.
In the latest budget, the government has made a provision of Rs 1,200 crore to the airline as additional equity infusion.
This is the third tranche of equity for Air India, which has received Rs 800 crore and Rs 1,200 crore respectively in the 2009-10 and 2010-11 budgets.