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MARCH 2016 ISSUE

Force Magazine

A Big Push

Government plans to develop India as a MRO hub in Asia
 

Dilip Kumar Mekala

The National Civil Aviation Policy (NCAP) aims to develop India as the maintenance, repair and overhaul (MRO) hub in Asia and relax the tax burden on MRO service providers. The MRO sector officials have met the civil aviation minister Ashok Gajapati Raju on various instances in the last few months to raise these issues and also request the government to address these concerns through the civil aviation policy. The draft policy that is currently in the public domain outlines various measures to ease tax burdens for the industry, and when implemented, it could become a game changer.

Airbus is looking at the possibility of opening an MRO facility in India after it has bagged a huge order from Indigo for A320neo
Airbus is looking at the possibility of opening an MRO facility in India after it has bagged a huge order from Indigo for A320neo

“The draft policy has focused on promoting the ‘Make in India’ programme and developing indigenous aero-related manufacturing with the help of global original equipment manufacturers (OEMs). We welcome the proposal of exempting Service Tax on output services of MRO and granting infrastructure status to MRO, ground handling, cargo and ATF infrastructure co-located at airports to avail the fiscal benefits under Section 80-IA of the Income Tax Act,” said Didar Singh, secretary general, FICCI after the government had released its policy document.

Discriminatory tax policies for Indian MRO players must be addressed immediately. At present, India’s MRO market size is estimated to be only a mere Rs 4,200 crore (USD 700 million). With the fleet sizes of Indian operators expected to double by 2020 according to Boeing’s latest Current Market Outlook (CMO), the need for strong domestic MRO is extremely crucial. If given proper push, the Indian MRO sector can potentially reach up to USD 1.2 billion by 2020 and create jobs.

Currently, the cost of servicing an aircraft in India is higher because of the taxes, and almost 90 per cent of the MRO work is currently being done outside India in countries like Sri Lanka, Singapore, Malaysia, UAE etc. When the taxes are waived, the costs in India would go down as much as 40 per cent.

While many companies provide MRO facilities outside India, Pawan Hans Ltd (PHL), are now planning to develop MRO services in the country. PHL is also diversifying into high potential sectors of Heliports/Helipads, Seaplane operation, small Fixed Wing aircraft and MRO. B.P. Sharma, chairman and managing director, Pawan Hans Ltd said, “We are starting (MRO facilities) at two places - in Delhi and at Juhu airport in Mumbai. And then we have a plan to extend it to other parts of the country, in the Northeast at Guwahati and one in southern region. Presently, there is no MRO facility for helicopters. We are coming forward with this. This will also create lot of job opportunities for pilot and aircraft engineers”. The new Draft Civil Aviation Policy also aims at giving a thrust to the helicopter sector seeing its great potential in regional connectivity and general aviation. PHL is targeting specific project segments and industries where it believes there is a high potential for growth and diversification efforts have yielded encouraging results.

 
 
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