)
India may be eyeing to become one of world's largest aviation markets, but lack of favourable policy for aircraft maintenance, repair and overhaul (MRO) business is hampering the growth of the segment, MRO industry sources said.
The MRO sector, considered an important part of the aviation sector, is still neglected due to lack of proper policy, an industry official said.
According to an estimate, aircraft MRO business is currently worth $500 million and is likely to grow over $1.5 billion by 2020. India, currently, constitutes one per cent of the global MRO market worth $45 billion.
"Currently, the MRO industry is facing the problems of high service tax, high royalty charges by airport operator and delay in Customs clearances of spare parts," Dhiraj Chhabra, associate vice-president (Marketing) of Air Works, one of the country's first MRO companies, said.
Even leading industry body ASSOCHAM had also called for streamlining of taxes to encourage aviation MRO facilities as the country has a huge potential to become a major hub due to low cost benefits and favourable geographical location.
Chhabra stressed on the need for urgent steps, not only by the government but also by the airport operators, so that Indian companies could compete with MRO companies in neighbouring countries like Sri Lanka, Singapore and Indonesia.
"If they can establish MRO facilities, then why can't we? That too, when our cost of labour is much more cheaper.
"Though the government was taking several steps to boost the aviation sector in the country, but the service tax makes our cost less competitive, despite companies having world class facilities and capability to meet global standards in the country itself," he said.
As per estimates, servicing of an aircraft at a local MRO helps an airline to save 30 to 40% in plane's maintenance costs, despite the tax regime on import of spares into the country making them 30% expensive as compared to international MROs, the official said.
Accepting that growth of MRO in India was now a necessity than an option, a senior Civil Aviation Ministry official said that airlines in India spend about 13-15% of their revenues towards maintenance which is the second highest cost item for airlines after fuel.
"Generally airlines carry on-tarmac inspections (A and B checks) in-house and work with third-party MROs for engine, heavy maintenance (C and D checks) and modifications," Chhabra said, adding that there was a lack of hanger space at the airports to carry out MRO work.
"Despite having no infrastructure like a hanger at airports, the Airports Authority of India charges 13% royalty, what is the rationale behind it?" he wondered.
Setting up an MRO is a highly capital intensive with a long break-even time.
It also requires continuous investment in tooling, certification from safety regulators such as the Federal Aviation Administration and the European Aviation Safety Agency and global aircraft manufacturers like Airbus, Bell Helicopter, Boeing, Bombardier Aerospace, Dassault Aviation, Gulfstream Aerospace, Honeywell and others, in addition to certification from the local regulator in order to stay relevant in the competitive global environment.
