 "Industry mixed on MRO concessions")
Budget 2013-14 proposed to exempt basic customs duty on parts and testing equipment for MRO facilities for aircraft. It enhanced the period for consumption of these parts or equipment from three months to a year.
Currently, the MRO industry has to pay 19 per cent customs duty on all imported parts of an aircraft if these are used within three months of delivery. Last year, then finance minister Pranab Mukherjee had offered a waiver in the customs duty for import of spares and testing equipment by MROs. However this had a rider---the waiver could only be availed if the spares were utilised in three months.
Indian MRO units face various challenges due to service tax, airport royalty and customs duty. Singapore, Sri Lanka and Dubai are MRO hubs, as these offer a competitive advantage vis-à-vis India.
The Budget announcement would benefit GMR Infrastructure and Air India. While GMR runs an MRO facility at the Hyderabad airport, Air India has similar facilities at the Delhi and Mumbai airports.
Dhiraj Chhabra, associate vice-president (marketing) of Air Works, told Business Standard, "This is a positive step from the finance ministry. Earlier, there was a lot of uncertainty on whether the imported part would be used within three months or not. If we couldn't, we either had to pay customs duty at 19 per cent or spend on transporting that part back to its country. We are hopeful this move will make India much more competitive with respect to its neighbours."
However, some believe the extension of the concession period is too small a step. Rohit Kapur, president, Business Aircraft Operators Association, said, "The extension of the concession period for MROs is inadequate. Granting this small concession won't solve the structural issues the industry is mired in. They should have done away with the entire customs duty…There was no mention of addressing the infrastructure concerns of the industry. It won't give an edge to Indian MROs over the Singapore, Sri Lanka and Dubai ones. A whole day is spent on the Railway Budget but aviation, another mode of connectivity, is barely mentioned in the Budget."