Union Budget 2024: Companies get limited relief to push MRO services

Union Finance Minister Nirmala Sitharaman on Tuesday announced a slew of measures to promote domestic companies involved in maintenance, repair and overhaul (MRO) of aircraft, boats and ships.

“To promote domestic aviation and boat and ship MRO, I propose to extend the period for export of goods imported for repairs from six months to one year. In the same vein, I propose to extend the time-limit for re-import of goods for repairs under warranty from three to five years,” Sitharaman said in her Budget speech.

Mansi Singh, Partner, BTG Advaya, explained that the government provides certain custom duty exemptions when the aircraft components, etc. are imported for repair or maintenance work. These goods earlier had to be exported within six months but now that period is extended to a year.

 

“So, it will allow an aircraft/engine to be in India for a longer time for repair or maintenance,” she noted.

Till date, if an aircraft, engine or a component from abroad was repaired or maintained in an Indian MRO facility, then its warranty period -- within which that item can again be brought back to India without any duty -- stood at three years.

“This has been extended to five years,” Singh explained.

Ashish Saraf, VP and Country Director, Thales in India said, “This will provide a major fillip to the industry, enhancing operational efficiency and reducing downtime for aircraft. This, with the recent tax cut announcement imposing a uniform 5 per cent GST rate on imported aircraft and parts, are set to boost the domestic MRO industry significantly.”

The Central government had on July 15 reduced these GST rates.

IndiGo had last year told the Ministry of Civil Aviation that Indian MROs should develop additional capabilities, such as nacelle maintenance, engine maintenance, and component support, in line with prominent international MROs.

Approximately 90 per cent of IndiGo’s aircraft MRO expenditures are outsourced to foreign companies, leaving only 10 per cent of the business for Indian companies, the airline’s engineering head, SC Gupta, had said.

Indian carriers allocate approximately 12-15 per cent of their total revenues to MRO services, positioning it as the second-largest expenditure following fuel costs, which account for approximately 45 per cent of their overall revenue.

Singh said, “With a combined order book of over 1500 aircraft of Indian airlines, reducing reliance on foreign facilities and enhancing local MRO capabilities is essential for positioning India as a global aviation hub.”