January 08, 2014
India’s bankers have accorded aircraft maintenance, repair and overhaul operations infrastructure status to facilitate easier borrowing from overseas, the country’s central bank says.
“On a review, it has been decided that, for the purpose of External Commercial Borrowings (ECB), Maintenance, Repair and Overhaul (MRO) will also be treated as a part of airport infrastructure,” the Reserve Bank of India (RBI) says.
As a result, the MRO business will be regarded “as part of the sub-sector of airports” in the transport sector of infrastructure, the RBI adds.
The latest initiative is aimed at revving up the country’s MRO sector, whose growth has been retarded by lack of proper infrastructure and unfavorable tax policies.
India’s aviation ministry is encouraging small and medium airports to set up MRO facilities. The burgeoning MRO business in India currently is estimated to be worth $800 million and is likely to grow to $1.5 billion by 2020, according to the country’s aviation regulator, the Directorate General of Civil Aviation (DGCA). However, the lack of availability of hangar space at key airports in the country has been a major constraint in setting up such facilities.
The country’s MRO capacity has been inadequate, and existing facilities fall short of airlines’ requirements. As a result, most airlines based in India—apart from national carrier Air India—send their aircraft to foreign maintenance providers, mostly in the Middle East or Singapore.
In addition, there are several financial, legal and procedural limitations that are preventing the MRO industry from growing. Last year, the MRO sector received a boost when the government announced tax concessions on imports of spare parts and testing equipment for aircraft repair work. The Indian government also extended the time period for consumption or installation of these parts or equipment from three months to one year. Consequently, India’s Tata Group announced plans in September to establish an aircraft MRO unit.
Recently, with ever-mounting passenger traffic and fleet expansion, the Indian aviation sector has allowed international aircraft companies to establish ventures in the MRO segment. The biggest Air India MRO facility—at Nagpur in western India, where Boeing has agreed to set up an airframe MRO shop—is expected to become operational later this year.