The im­por­tance of be­ing at the cen­tre

Ex­ploit­ing its ge­o­graph­i­cal ad­van­tage, Nag­pur can be­come a hub for air­craft main­te­nance, re­pair and over­haul. It can also be­come an im­por­tant ware­hous­ing site

Governance Now - - LOGISTICS - Iyer is se­nior fel­low, Pahle In­dia Foun­da­tion. Chi­dambaran G Iyer

Nag­pur was lo­cated at the ge­o­graph­i­cal cen­tre of in­dia be­fore par­ti­tion. in in­de­pen­dent in­dia too, one ma­jor city close to the very cen­tre of the coun­try is nag­pur. The coun­try woke up rather late to ex­ploit­ing its lo­ca­tional ad­van­tages, when in 2008 the pro­posal to con­struct an in­ter­na­tional multi-modal pas­sen­ger and cargo hub (Mi­han) spe­cial eco­nomic zone (sez) was ap­proved. Wikipedia calls it the big­gest de­vel­op­ment project cur­rently un­der­way in in­dia in terms of in­vest­ments.

im­ple­men­ta­tion of gst can prove to be a bless­ing in dis­guise to this ini­tia­tive. Big con­sumer busi­nesses re­alise that each met­ro­pol­i­tan city in in­dia is roughly equidis­tant at around 900 km from nag­pur. Thus, a cen­tral ware­house in nag­pur will re­sult in con­sid­er­able lo­gis­tics sav­ings. ex­pect­edly, in­vest­ments in ware­houses in and around nag­pur have surged, which should trans­late into an in­crease in air traf­fic. Fa­cil­ity of main­te­nance, re­pair and over­haul (Mro) at such a lo­gis­tic hub makes sense. luck­ily, this was al­ready in the works at Mi­han. in FY 2006, when air in­dia inked a multi­bil­lion-dol­lar pur­chase deal for air­craft, Boe­ing agreed to build an Mro fa­cil­ity at nag­pur. This fa­cil­ity is touted as the most mod­ern Mro in the sub­con­ti­nent, with con­nec­tiv­ity to nag­pur in­ter­na­tional air­port by fully de­vel­oped and op­er­a­tional taxi track.

glob­ally, among the three main Mro ca­pa­bil­i­ties – air­frame, en­gine and com­po­nent ser­vices – en­gine main­te­nance makes up the largest pro­por­tion of the mar­ket, fol­lowed by com­po­nent ser­vices and then air­frame heavy main­te­nance. en­gine, air­frame and heavy main­te­nance usu­ally re­quire spe­cialised labour, are in­fra­struc­ture in­ten­sive; and hence are per­formed by spe­cialised play­ers. This is where the op­por­tu­nity lies for nag­pur.

in 2017, the Mro busi­ness of in­dian car­ri­ers was es­ti­mated to be around ₹5,000 crore. as our air travel picks ups, this num­ber is ex­pected to rise. Main­te­nance ac­counts for around 10-15 per­cent of an air­line’s cost. How­ever, about 90 per­cent of this busi­ness went to coun­tries such as sri lanka, sin­ga­pore, Malaysia and the uae. cheaper costs in th­ese coun­tries are due to favourable tax laws and lower end-to-end turn­around time. The to­tal tax com­po­nent for an Mro based in in­dia comes to around 20-22 per­cent. given the speed of our var­i­ous clear­ances, the end-toend turn­around time for ser­vic­ing an air­craft is way too much com­pared to in­ter­na­tional stan­dards. as a re­sult, in­dia loses busi­ness from our do­mes­tic flight op­er­a­tors. This is an irony since labour costs in in­dia are much lesser at $30-50 per man-hour com­pared to global rates of $40-100 per man-hour.

In its ef­forts to give boost to the Air in­dia nag­pur Mro fa­cil­ity, the union bud­get 2016 as well as the gov­ern­ment of Ma­ha­rash­tra of­fered nu­mer­ous in­cen­tives for it. as a re­sult, in 2017, spicejet signed an agree­ment with air in­dia to ser­vice its Boe­ing 737 air­craft at this Mro. as per re­ports, Mi­han is also gain­ing trac­tion for Mros from the pri­vate sec­tor with an an­nounce­ment of a new air­frame Mro fa­cil­ity. in the first phase, which will come on­stream by septem­ber 2018, this pri­vate fa­cil­ity will cater to all the main­te­nance re­quire­ments of nar­row-body air­crafts. Mi­han will thus have fa­cil­i­ties that will cater to both wide- and nar­row­body air­crafts, giv­ing it scale.

How­ever, it faces a prob­lem with re­spect to at­tract­ing tal­ent. For ex­am­ple, air in­dia was un­able to con­vince its engi­neer­ing staff from Mum­bai and Delhi to re­lo­cate to nag­pur. as a re­sult, air in­dia in­vited bids from pri­vate play­ers to lease the Mro air­frame fa­cil­ity at nag­pur. re­sponse was not en­cour­ag­ing as it re­ceived only one bid af­ter which air in­dia de­cided to run the fa­cil­ity on its own. Though at­tract­ing tal­ent is an is­sue, this can be tack­led at the com­pany level by an­nounc­ing suit­able in­cen­tives to re­lo­cate.

given the abun­dance of engi­neer­ing tal­ent and low labour costs, in­dia should have a thriv­ing Mro in­dus­try. This has been recog­nised in the new civil avi­a­tion Pol­icy, and the cen­tral gov­ern­ment has laid down its aim for de­vel­op­ing in­dia as an Mro hub for air­crafts. nag­pur is geo­graph­i­cally blessed to be the ful­crum of that. What needs fo­cus is to pace up the ex­pan­sion of the ex­ist­ing air­port as well as ex­pe­dite new cargo hub pro­jects at Mi­han, which are im­por­tant for air traf­fic to in­crease at Nag­pur. The state and cen­tral gov­ern­ments need to ex­pe­dite pro­cesses so that nag­pur be­comes the Mro hub of the coun­try.

Big con­sumer busi­nesses re­alise that each met­ro­pol­i­tan city in In­dia is roughly equidis­tant at around 900 km from Nag­pur. Thus, a cen­tral ware­house in Nag­pur will re­sult in con­sid­er­able lo­gis­tics sav­ings.

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