Monday, January 01, 2018

Budget 2018: How Modi government can push civil aviation sector by reviving MRO industry

Prime Minister Narendra Modi has time to time emphasized that aviation sector is crucial for country’s development. Notably, Maintenance, Repair and Overhaul (MRO) industry does play a pivotal role in this sector. MRO industry is engaged in the business of providing engineering support to the local airline companies by undertaking repair and maintenance of aircraft and related components. Industry body FICCI has recommended that zero rating be prescribed for the Indian aviation MRO industry under the GST regime in the upcoming Union Budget. Finance Minister Arun Jaitley will present the 2018 budget on February 1. “The prevailing archaic rules continue to allow import of such aviation MRO services from foreign-based MROs on duty/tax free basis, whilst Indian MRO companies are required to conform to the tax/duty regime, thereby increasing the cost of same services by Indian MRO companies by 20% to 25%,” says FICCI.

According to FICCI report, around 30% of units in India have been shut down over the last few years. “Due to the adverse tax regime, no investment has taken place in the last few years in this sector. It is accordingly recommended that zero rating be prescribed for the Indian aviation MRO industry under the GST regime,” FICCI says.

With Indian carriers expected to increase their fleet size to 1,740 planes in the next 20 years, the domestic MRO market is projected to be worth USD 5.2 billion by 2026, according to leading consultancy KPMG. It also projects over ten-fold increase during the next ten years in MRO industry’s revenues from the current USD 92 million to USD 975 million, according to reports.

Recently, Brazilian aerospace major Embraer has partnered with state-owned Air India to set up a maintenance and repair MRO facility to maintain its brand of private and business jets in the entire Southeast Asian region. The proposed facility was expected to come up at the Begumpet airport in Secunderabad in the southern state of Telangana, they said.
01/01/18 Debjit Sinha/Financial Express