India, keen to sell the loss-making, debt-ridden airline, finalised plans in late March to divest a 76 percent stake and offload about $5.1 billion of its debt.
But the government has stipulated the winning bidder cannot merge the airline with existing businesses as long as the government holds a stake. The winner may also be required to list Air India and would need to abide by conditions designed to safeguard employee interests, restricting its ability to cut staff.
Since the terms were disclosed, no company has come forward to say it is interested or to reaffirm previous interest, while Jet Airways and rival IndiGo, have already publicly opted out of the race.
Tata Group, which already owns stakes in two airline joint-ventures in India, does not see "how a deal would be workable" under the current terms, said one of the sources, who asked not to be identified due to the sensitivity of the matter.
The same source also said the airline had too much debt and noted there was little clarity on what a buyer would be allowed to do with the airline's large workforce.
"Anyone who puts money upfront ... even for Tata to put in that kind of money, it would want complete control," added the second source.
Prior to the disclosure of the terms, there had been some expression of interest from the group.
In January, Leslie Thng, the chief executive of Vistara, a joint-venture between Tata and Singapore Airlines told reporters its owners were open to evaluating a bid for Air India. Vistara declined to comment and Singapore Airlines had no immediate comment on Wednesday.
Last October, Tata Group Chairman N. Chandrasekaran, said in a TV interview the group would "definitely look" at Air India once the privatisation process was finalised.
(Except for the headline, this story has not been edited by NDTV staff and is published from a syndicated feed.)
Get Breaking news, live coverage, and Latest News from India and around the world on NDTV.com. Catch all the Live TV action on NDTV 24x7 and NDTV India. Like us on Facebook or follow us on Twitter and Instagram for latest news and live news updates.