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The Union Budget offered minor concessions to the MRO - maintenance, repair and overhaul industry as the government has increased the time period for consumption or installation of parts and testing equipments imported for maintenance, repair and MRO of aircrafts by units engaged in such activities form the existing three months to a year.
Calling MRO as a nascent industry in India the Union Finance Minister said the sector has been offered some concessions. The move is likely to benefit home-grown MRO firms such as Airworks, Indmar and firms like GMR that has an establishment for such jobs at Hyderabad with a foreign partner. The MRO industry says the move is the first big step in the right direction and will help the industry to compete with the MRO firms in the region like in Dubai and Colombo and Singapore.
The State-owned airline Air India that is the only airline in the country allowed to take third party MRO jobs is likely to benefit as well. The airline recently hived off this division as a separate business unit. The import duty is about 19 per cent on the spares and equipment.
Vivek Gour, Managing Director and CEO of Airworks, one of the bigger MRO firms in Indian MRO space, said that the move essentially means that the company do not have to pay import duty for one year and this will not only improve efficiency but will give it lot of flexibility to not only provide labour and consultancy jobs but also to get spares and save some money that will in turn benefit its customers. This move allows the company to be competitive in the region and compete with foreign firms, he added.
Combined annual MRO spends in India according to industry sources is $650-800 million. But indigenous firms get only $200-250 million of that spent, rest is mopped up by foreign MRO firms as they have a competitive market abroad with less taxes. General aviation constitutes about 20-25 per cent of this market.
But the larger demand of the MRO industry of bringing down the service tax from 12.5 per cent it pays along with an import duty including countervailing duty of 18.5 per cent on spares has not been addressed. The MRO industry was lobbying for a uniform tax rate of 2.5 per cent.
The government earns approximately Rs 100-Rs 150 crore from the levy of import duty on spares and equipment. Aviation experts are generally disappointed with the little mention of civil aviation industry in the budget.