Waiting for Reforms

Yunus Dar

This year India has been the fastest growing domestic air travel market globally with 18.6 per cent more people flying within the country than in the previous year. This has presented an opportunity for the country to be the leading global Maintenance, Repair and Overhaul (MRO) hub. Growing aircraft fleet size, new airports, strategic geographic location and a rich pool of engineering expertise could help India become the leader in the MRO sector.

The current market size of the MRO industry in India, which is estimated to be about USD 700-800 million, is expected to reach USD1.2 billion by 2020. The global MROs view the country with a keen interest seeking a valuable gateway between the Middle East and Asia-Pacific. The low labour costs locally are crucial for this sector to boom. The Aviation Week’s Fleet and MRO Forecast pegs the MRO market growth in India at 7.7 per cent annually over the next decade.

It’s not surprising considering that the fleet growing at 9.9 per cent annually, which was 620 in 2018, will see a fleet of 2,300 in 2040. The country has over 1,000 aircraft on order at present, and is likely to become the third largest buyer of commercial passenger planes in the world, only behind the US and China.

The factors responsible for this growth are many. In recent years the government has taken many new initiatives to boost the sector. Some of these are: expansion and development of new airports, growing fleet of low-cost carriers, renewed Foreign Direct Investment (FDI) policy and increasing focus on regional connectivity.

Challenges in the Sector

Despite all the above factors, the MRO industry faces many hurdles in India today. The severe tax anomaly with foreign jurisdictions has put the industry at loggerhead with the government. The vast expansion of the fleet demands a robust MRO ecosystem which the government fails to realise. There has been widespread criticism on the prevailing tax structure and import duties in MRO industry, which are severely hampering t