TBM Staff - Mumbai
The government plans to relax norms for the aviation and shipping maintenance, repair, and overhaul (MRO) industry, aiming to make India a hub for these facilities and fuel transportation sector growth. Finance Minister Nirmala Sitharaman, in her budget speech on Tuesday, proposed extending the export period for goods imported for repairs from six months to one year and the re-import period for goods under warranty from three to five years.
Industry experts welcomed this decision, seeing it as a significant boost to India’s emerging MRO industry, benefiting both domestic and regional airlines. Ashish Saraf, Country Director, Thales in India, stated that this change would enhance operational efficiency and reduce aircraft downtime. Thales plans to establish an avionics MRO facility in Gurugram by next year. Samir Kanabar, a tax partner at EY India, noted that extending export and re-import timelines is a step toward positioning India as an MRO hub, attracting foreign shipping and aviation players.
The potential of the Indian MRO industry was highlighted in the Economic Survey for 2023-2024, which emphasised the need to develop capabilities in MRO, leasing, and skilling to support Indian airlines. The government has rationalized taxes in the sector, with the GST Council recommending a uniform 5% integrated goods and services tax rate at its 53rd meeting in June. This move aims to reduce operational costs, resolve tax credit issues, and attract investment in the sector.
Previously, varying GST rates on aircraft components posed challenges, including an inverted duty structure and GST accumulation in MRO accounts. Civil Aviation Minister Kinjrapu Rammohan Naidu noted that the new policy eliminates these disparities, simplifies the tax structure, and fosters growth in the MRO sector. With over 1,600 aircraft ordered by Indian carriers, this policy change is expected to catalyze the Indian MRO industry, potentially making India a major hub for South Asian airlines.
Despite these positive developments, the budgetary allocation for the civil aviation ministry was cut to INR 2,357.14 crore for FY25 from the revised estimate of INR 2,922.12 crore and the initial estimate of INR 3,113.36 crore in FY24. India’s regional air connectivity scheme, Udan, will receive INR 502 crore in FY25, lower than the revised estimate of INR 850 crore and the initial estimate of INR 1,244 crore in FY24. This funding will be used to revive 22 airports, start 124 air routes, and support north-east connectivity.
