India to become aircraft maintenence hub

With the bulk of maintenance, repair and overhaul (MRO) expenses of Indian carriers spent outside the country, the government is now planning to reverse the trend and develop India as an MRO hub through tax benefits and easing security norms.

The government is mulling over exemptions like customs duty, zero-rate service tax, simplification of clearance and easy access for foreign pilots and technicians to help the MRO sector grow.

According to the government, the MRO business of Indian carriers stood at Rs 5,000 crore, 90 per cent of which is currently being spent outside India in Sri Lanka, Singapore, Malaysia and the UAE among others. “Given our technology base, the government is keen to develop India as an MRO hub in Asia, attracting business from foreign airlines,” according to the recently released Revised Draft Civil Aviation Policy.

Analysts believe that given the right environment, MRO industry in India has the potential to achieve an annual growth rate of 10 per cent for the next 10 years.

The Indian MRO sector is around 1.5 per cent of the global $50 billion industry.  As per the draft policy, the government proposes to make service tax on output services of MRO zero-rated while exempting customs duty for aircraft maintenance tools and tool-kits. To enable economies of scale, it is also proposed, the period for which the spare parts imported by MROs can be stored tax-free shall be extended to three years.