COR­RECT POL­ICY IM­BAL­ANCES

SP's Airbuz - - Table of Contents - Bharat Malkani, Chair­man & Man­ag­ing Di­rec­tor - Max Aero­space and Avi­a­tion

With air­lines fleets in In­dia set to more than dou­ble from 500 to 1,000 dur­ing the com­ing decade, sup­ported by favourable govern­ment poli­cies, the size of the In­dian air­line MRO In­dus­try can grow from $1.4 bil­lion to $5 bil­lion with the po­ten­tial di­rect em­ploy­ment grow­ing to three lakh em­ploy­ees over the next decade

With air­lines fleets in In­dia set to more than dou­ble from 500 to 1,000 dur­ing the com­ing decade, sup­ported by favourable govern­ment poli­cies, the size of the In­dian air­line MRO In­dus­try can grow from $1.4 bil­lion to $5 bil­lion with the po­ten­tial di­rect em­ploy­ment grow­ing to three lakh em­ploy­ees over the next decade

MAIN­TE­NANCE, RE­PAIR AND OVER­HAUL (MRO) of air­craft, its com­po­nents and en­gines is glob­ally re­garded as a strate­gic busi­ness. The skills re­quired to sup­port civil and mil­i­tary air­craft are sim­i­lar. The abil­ity of a na­tion to per­form these tasks within the coun­try is im­per­a­tive to en­sure sovereignt­y of its air power.

In­dia is in the midst of an avi­a­tion boom of its civil avi­a­tion in­dus­try. Growth rates are consistent­ly at 20 per cent for the last few years. Based on data from Air­bus and Boe­ing the cur­rent fleet of 550 air­lin­ers will grow to 1000 by 2023. Due to his­tor­i­cal lop­sided tax poli­cies of the pre­vi­ous govern­ment the MRO in­dus­try was lit­er­ally ‘ handed over’ to for­eign MRO com­pa­nies and the sit­u­a­tion we face today is that 90 per cent of the MRO re­quire­ments of In­dia are im­ported. MRO is es­sen­tially a ser­vices in­dus­try and un­like other ser­vice in­dus­try planes have the abil­ity to fly to for­eign lo­ca­tions, which is the very na­ture of their ex­is­tence.

The in­dus­try es­ti­mates due to these im­ports we have lost 40,000 di­rect jobs to coun­tries like Sri Lanka, Sin­ga­pore, Thai­land, France and Ger­many. These can eas­ily be brought back to In­dia by cor­rect­ing the fis­cal im­bal­ance that has af­fected this in­dus­try since In­de­pen­dence. In­dian engi­neer­ing is amongst the best in the world and in our hum­ble opin­ion; there is no valid ar­gu­ment that con­tin­ues to al­low this drain of pre­cious forex and ca­pa­bil­ity to for­eign lo­ca­tions. The cur­rent MRO im­port bill (2017) of $850 mil­lion will rise to $2 bil­lion by 2023 un­less the Govern­ment re­alises the po­ten­tial of this in­dus­try and takes quick and se­ri­ous cor­rec­tive ac­tion.

In­dia has the abil­ity to be the MRO hub of South Asia given its scale and tech­ni­cal ca­pa­bil­i­ties. We only need our Govern­ment to sup­port In­dian in­dus­try. We can con­vert this $2 bil­lion of net im­port of MRO into a $5 bil­lion ex­port po­ten­tial in five years. To achieve this, we must evolve a tax and reg­u­la­tory mech­a­nism that re­wards In­dian MRO’s as op­posed to pe­nal­is­ing them as it stands today. We are sub­si­dis­ing im­ports by of­fer­ing our en­tire na­tions MRO on a sil­ver plat­ter to for­eign MRO com­pa­nies. This is why no FDI has ac­crued in this sec­tor even though 100 per cent FDI has been al­lowed. The rea­son is sim­ple: it con­tin­ues to be ad­van­ta­geous for In­dian car­ri­ers/op­er­a­tors to im­port MRO.

Our re­quest is that the In­dian Govern­ment un­der­stands the value of this strate­gic in­dus­try and cre­ates a fis­cal en­vi­ron­ment that gives In­dian MRO in­dus­try an ad­van­tage over its for­eign com­peti­tors for a limited pe­riod of five years so that they are able to cre­ate nec­es­sary in­fra­struc­ture that we can use to com­pete. We have ben­e­fited for­eign MRO com­pa­nies for over 70 years, now is the op­por­tu­nity to change the bal­ance in favour of lo­cal MRO in­dus­try.

This 3% cost in­crease is lesser than even the fee charged by air­port op­er­a­tors! Thus this pol­icy achieves both ob­jec­tives si­mul­ta­ne­ously. It brings rev­enues to the In­dian Govern­ment with a min­i­mal im­pact on air­line ticket prices as well as en­cour­ages do­mes­tic MRO by fi­nally of­fer­ing a level play­ing field.

As In­dian MRO’s ramp up their ca­pa­bil­ity, this cost bur­den will keep re­duc­ing and even the di­rect taxes re­cov­er­able from di­rect staff em­ployed on rev­enue of $1 bil­lion gen­er­ated from lo­cal in­dus­try will sur­pass the same in mul­ti­ple num­bers. In­di­rect em­ploy­ment is not even taken into ac­count in this cal­cu­la­tion nei­ther are ben­e­fits from ex­ports that have the abil­ity to touch $10 bil­lion in 10 years.

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