Finance Minister of India, Nirmala Sitaraman is all-set to announce the Union Budget 2022-23 on 1st February 2022. This budget will hold special importance as the pandemic affected nation of 1,405 million will be watching with bated breath for reforms and reliefs in their industry or service. In the last budget, the government focussed on aggressive growth without giving a second thought to fiscal deficit. In this Budget, expectations are high, especially from the Aviation MRO sector as the government had promised to make India an MRO hub in South-Asia.
The Aviation MRO sector is so far completely neglected by the Government in terms of both building a sound eco-system in the country as well as building capability. The already cash-strapped airlines reeling under pandemic losses are barely able to survive. Under such circumstances, the MRO industry is looking at the Budget with hopes to revive them and help them gain firm grounds against their foreign counterparts.
The MRO business in India is mostly dependent on spares which are imported as the manufacturing process does not happen in the country. Therefore, the government needs to give tax exemption on such spares for at least 5 years. This will automatically reduce redundancy and will help in easy clearance of spares in India. As the MRO industry in India is still nascent this move will have a significant impact.
The Government needs to give special incentives to set up engine MROs and APU MROs in the country says Bhaskar Mishra of Air India Engineering Services. He further adds that any airline operating in India needs to be given tax benefits if it uses an Indian MRO for their repair activities. Also, he urges the government to support newer facilities coming up in the country, this can be done by urging the larger MROs to join hands with smaller repair shops to establish a sound eco-system in the country.
Indian MRO sector missed the bus on the growth and development front about a decade back with robust MRO businesses were being set-up in India’s neighbouring nations like Sri-Lanka, Singapore, Malaysia etc. This time the government needs to make sure we don’t miss the opportunity again. Hence the government needs to provide incentives to new investment through concessions/ Tax rebate / PLI etc, similar to auto industry and making offset available from military business.
According to Mr. Ashok Gopinath CEO of GMR Aero Technic government needs to look at investment in Component and engine MRO on priority. Also, despite GST reductions and 100 per cent FDI there is no traction on major investment in the MRO sector. The government needs to look at this on priority, he further adds.
Earlier in 2020, the Centre had reduced the GST rate on aircraft repair and maintenance work to 5 percent from 18 percent and announced that it would lease out airports’ land to repair units at discounted rates to attract investment and boost growth. Currently, the MRO industry in India is not matching the increase in Airlines or the number of Aircraft as the airlines prefer to send their Aircraft abroad for services says Anoop Kumar of AIESL. Hence the Government must impose duties on the import of MRO services and give incentives for the export of MRO services. Currently, the rentals and royalty charged by private and AAI airport operators on MRO services are exorbitant. They need to be rationalized, and royalty needs to be abolished. Airlines at the time of leasing/purchasing the Aircraft must impress upon OEM to provide maintenance data/tools & equipment/ training to them, which they should be able to share with MROs with whom they have tied up in India he concludes.
Overall, the Maintenance Repair and Overhaul industry in India wants the government to give them a level-playing field by bringing down the taxes along with lowering the import duty on spares and putting forward a favourable GST regime for the MRO sector.
