Industry body Assocham today called for streamlining various taxes to encourage aviation Maintenance, Repair and Overhaul (MRO) facilities in the country to make it a global hub.
The trade body said India has huge potential to become a major hub due to low cost benefits, favourable geographical location and sharp upswing in air passenger traffic. The Indian civil aviation sector is currently celebrating 100 years of existence but its share is just one per cent in the $50 billion global MRO market,according to Assocham.
Passenger traffic of scheduled airlines jumped from 73 million in 2005-06 to 142 million in 2010-11, the Associated Chambers of Commerce and Industry of India said. “By a conservative growth rate of 10 per cent, throughput is expected to be 540 million passengers by 2025,” said its secretary general D S Rawat.
At the same time, cargo traffic during the period is expected to touch nine million tonnes from 2.33 million tonnes in the last financial year. India’s scheduled airlines have 430 planes now. Industry estimates suggest this figure is likely to go up to 1,500 by 2025. Besides, the general aviation comprises 700 small planes and 300 helicopters. In addition, the business jet fleet has about 140 aircraft. This is expected to grow to 2,500 aircraft and 900 helicopters, Assocham said. “With a fleet size of Indian scheduled and non-scheduled operators likely to treble in the next one-and-a-half decade, the need for a strong domestic MRO industry gains ground.
“India’s unique geographical position offers an opportunity to become a global hub for international airlines as well,” said Rawat.
The minimum requirement for an MRO facility is about $100 million. Indian rules allow 100 per cent Foreign Direct Investment for greenfield MRO projects through the automatic route, Assocham said. A full-fledged MRO unit doing all types of checks requires 35,000 to 45,000 engineers. Besides shortage of skilled personnel, the country faces stiff competition from neighbouring MRO hubs like Dubai, Singapore, Malaysia and China. Indian aviation has seen a tremendous growth in the past 10 years due to government’s open sky policy, arrival of low cost airlines and air travel becoming more affordable for middle income people.
A total of 12 greenfield airports are currently being developed. But the government must rationalise tax structure so that it can grow further, said Rawat. MRO facilities are subject to 10.3 per cent service tax.
There is no import duty for foreign MRO companies from overseas suppliers but domestic players have to pay import duty of 30 to 40 per cent. In addition, there is 18.5 per cent minimum alternate tax on aerospace special economic zones which are coming up at Nagpur, Belgaum and Hyderabad.
“The increase in traffic and aircraft fleet will require significant investments in terms of expanding and upgrading existing infrastructure facilities besides creating new ones,” said Rawat.
“For that, a right policy mix, an encouraging tax structure and a healthy regulatory mechanism are essential,” he added.
