New aviation policy to give fillip to MRO industry

The Maintenance, Repair and Overhaul (MRO) sector, which ensures the availability and airworthiness of aircrafts, is of critical importance to global aerospace & defence industry. Industry reports identify India as the seventh-largest civil aviation market in the world. It is set to become the world's third largest by 2026, representing a significant expansion scope for MRO facilities in India. About 90 per cent MRO requirements in India are currently met through imports. India's indigenous MRO sector is in a nascent stage, but carries a significant growth potential. The sector's growth will mainly be fuelled by a growing aviation industry (expected to generate nearly 90,000 jobs and save about $2 billion in foreign exchange). Dependence on foreign MROs is likely to continue until the domestic MRO industry catches up with its foreign counterparts in terms of size and certified breadth of services.

The global market is worth $80 billion in which India's share is just 2.5 per cent or approximately Rs15,000 crore. Civil Aviation Ministry has announced new MRO (Maintenance & Repair Overhaul) Policy that envisages new centres to be set up at eight airports including Chennai and Begumpet in Hyderabad. The ministry plans to implement allotment process for MROs via open tender and that it will provide allotment for 30 years to provide stable ecosystem for investors. The new Policy is part of the 100 days agenda of the Ministry. MRO is a kind of servicing centre for aircraft. The Indian MRO industry size is expected to increase from $1.7 billion in 2021 to $4.0 billion by 2031, at a compound annual growth rate (CAGR) of 8.9 percent against the expected global CAGR of 5.6 per cent. With more than 1,000 aircraft currently on order, the country is likely to become the third-largest buyer of commercial passenger planes in the world, only after the US and China. This translates into demand for 200–300 major maintenance checks annually. Replacing ageing aircraft in the fleets of several airlines also creates scope for MRO to meet redelivery contracts. India is also poised to become a large defence aircraft market, propelling demand for military MRO capabilities as well. The Goods and Services Tax (GST) has been slashed from 18 per cent to five per cent on domestic maintenance, repair and overhaul (MRO) services for the aviation sector. The Ministry of Civil Aviation, while announcing the reduction in the GST rate on MRO services, also noted that the "issue of reduction of Value Added Tax (VAT) on aviation turbine fuel (ATF) has been taken up with the states and the UTs."

The following 11 States/UTs have reduced the VAT on ATF to below 5 per cent: Andaman & Nicobar Islands, Dadar & Nagar Haveli and Daman & Diu, Gujarat, Haryana, Himachal Pradesh, Jammu & Kashmir, Ladakh, Madhya Pradesh, Tripura, Uttar Pradesh and Uttarakhand, the statement added.