Page 23 - AAA OCTOBER - DECEMBER 2019 Online Magazine

tion in the GST slab would not only be in the
interest of the MRO sector, but for the nation
as well, the association head notes. The airline
industry spent about $950 million in 2016-17 in
aircraft maintenance and serving, and only 10
percent of this business came to Indian MRO
companies. Amber Dubey, partner and head of
Aerospace and Defence at KPMG commented,
“Buying new aircraft and starting new airlines
are not enough. Nobody is going to buy a car
in Delhi and take them to Singapore, Thailand
or Sri Lanka for servicing. Why are we in such
a bad shape when it comes to MRO?”

In the absence of a well-developed MRO base
in India, there are currently around 40 overseas
MRO providers approved by the Indian aviation
authority DGCA to conduct work on Indian-
currently levied at 18 percent. The MRO Association of India has registered aircraft, in locations such as the UK,
warned that the industry could face a closure if the Goods and Germany, France, Romania, Jordan, Israel, the
Services Tax (GST) “anomaly is not set right”. UAE, Sri Lanka, China, Singapore, Malaysia and
Founder secretary general of the association Pulak Sen says Australia, while the plans by some of the large
airlines are finding it cheaper to send their aircraft overseas for global MRO players to establish base in India
maintenance although they cost more. The cost benefit that the are yet to materialize.
MRO industry enjoyed because of low cost of labour in India
--US$20 to US$35 an hour -- has been eroded due to the GST Thailand faced a similar situation. During the
burden. year 2017, 60 percent of aircraft maintenance
services for Thai carriers was provided by
He referred to countries such as Singapore and Malaysia where foreign companies. The Thai government has
GST is levied at 7 percent and Sri Lanka which does not levy any taken steps to change this situation by pro-
tax at all on the industry. According to the association, with 500 moting the domestic maintenance industry,
commercial aircraft in the Indian airline fleet at present, the value including generous tax incentives modelled
of MRO work is estimated to be around US$900 million. The value on Singapore’s program, where maintenance
of MRO work will touch US$1.75 billion in the coming years when powerhouses are also turning to state-of-the-
another 1,000 aircraft are added to the fleet strength. “But the art technology such as automation to offer
industry can suffer tremendously if things remain same,” Sen warns. high-quality maintenance to have their com-
petitive edge. If India also can translate the
The major growth engine in the aviation sphere will be Asia, espe- changes that are currently being discussed
cially China and India, which will become the largest region, nearly into reality, it could be a game changer for the
doubling in-service fleet and related MRO demand. Hence a reduc- industry.

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