The growth of the maintenance, repair and overhaul (MRO) industry in the Indian aviation sector will be pivotal to its future in the global spectrum. Concerted efforts have been made to revitalise the aviation sector following the pandemic, and the MRO industry is one of the main drivers of this change. As per the MRO Association of India, currently, a significant 80 per cent share of MRO service requirements are fulfilled through imports, highlighting the need to harness domestic opportunities. The growth in passenger and aircraft movement makes engineering and maintenance crucial. In light of this, several relevant actions have recently been taken by the central and state governments. The introduction of the MRO policy, creation of advanced MRO hubs/ facilities at Indian airports, slashing of the goods and services tax (GST) on MRO services, the reduction in import duty on spare parts, and other developments will be instrumental in realising the vision of making India a global MRO hub.
MRO policy developments
To improve Indian airports and bring them at par with those of neighbouring countries, the Ministry of Civil Aviation (MoCA) announced a 100-day plan (with 16 crucial points) for the civil aviation sector in September 2021. One of the initiatives under this plan is the new MRO policy, which aims to attract investments to the sector for the development of airports and their MRO arms.
Under this policy, eight airports have been identified for setting up MRO facilities, located at Begumpet in Telangana, Bhopal in Madhya Pradesh, Chennai in Tamil Nadu, Chandigarh, Delhi, Mumbai in Maharashtra, Kolkata in West Bengal, and Tirupati in Andhra Pradesh. These states are on board with taking active measures to create aircraft repair hubs through these facilities.
Furthermore, the policy will mitigate issues of land shortage for MRO services by enabling the lease of land through open tenders and removing the royalty charged by the Airports Authority of India (AAI). Land for establishing MRO facilities will now be allotted for 30 years instead of the previous short-term period of three to five years. Lease rental rates will be decided based on bidding instead of the previous method of AAI predetermining the rates. The rate of its escalation has been set at 15 per cent every three years instead of 7.5-10 per cent per annum. MoCA also plans to converge military and civil MRO activities through this policy.
Growth of MRO facilities
Dependence on other countries for MRO services can be reduced by the establishment of state-of-the-art facilities in India. To this end, several new developments have been undertaken by different airports. In May 2022, Indira Gandhi International Airport became the first airport in the country with two dedicated MRO hangars for the general aviation (GA) terminal. These new hangars help the operators save time and money while also addressing environmental pollution. Covering an area of 2,000 square metres (sqm) for each hangar, it will be able to accommodate about six to eight mid-size GA aircraft.
The second MRO facility was inaugurated at Bengaluru’s Kempegowda International Airport by InterGlobe Aviation Limited in November 2022. Built on 5 acres of land, this facility will accommodate up to two narrow-body aircraft along with support infrastructure, including a quick-engine-change warehouse and engineering offices for all repair and maintenance work at the airport. IndiGo Airlines has signed a 20-year pact with Bengaluru International Airport Limited for the facility.
In June 2022, an MRO hub along with a dedicated Aviation Innovation and Research Centre was announced for the Noida International Airport in Jewar, Uttar Pradesh. The facility will reportedly be set up on 40 acres of land during the first phase of the airport’s construction. Yamuna International Private Limited will develop the facility, along with the airport.
Meanwhile, an MRO facility has been announced to be set up in Hyderabad by the France-based company Safran, utilising a foreign direct investment of $150 million. The aim is to make it the biggest MRO facility in India, with a capacity to handle 250-300 engines annually. It will also be able to service leap-1A and leap-1B engines, which constitute the majority of orders from Indian airlines. Its construction is planned to begin in 2023, and operations in 2025.
Other upcoming facilities include those at Belagavi airport in Karnataka, Bhopal airport and Tirupati airport. Land at Belagavi airport was awarded by AAI to Aviation Connectivity and Infrastructure Developers Private Limited in November 2022. Meanwhile, the groundbreaking ceremony for Bhopal airport’s MRO facility took place in October 2022. Two MRO facilities will be constructed at Bhopal airport over an area of 5,600 square metres at an investment of Rs 0.3 billion. The selected bidders are responsible for developing the necessary infrastructure within two years of the issue of the award, that is, by 2024. This project is based on the design-build-operate-maintain-transfer (DBOMT) model. The deadline for submission of bids for the development of an MRO centre at Tirupati airport on DBOMT basis, closed on May 5, 2022.
Other developments and challenges
Digital MRO services are poised to grow in India in the near future, and one of the major recent developments in this direction is the agreement signed between Adani Defence Systems and Technologies Limited, and Aerospace for the acquisition of Air Works, India’s largest MRO company. Estimated to cost Rs 4 billion, this is an important step towards turning India into a large market for defence aircraft. The market size is expected to triple from $1.7 billion at present to $5 billion by 2030, as per industry reports. Furthermore, the government has made provisions to increase the demand for these services by reducing the GST from 18 per cent to 5 per cent. This measure, along with the previous reduction of value added tax on aviation turbine fuel, will attract investors to the industry.
While India still possesses the infrastructural support and skilled manpower needed for the upkeep of the MRO sector, the lack of regulatory approvals for original equipment manufacturers (OEMs) for MRO companies is a big roadblock. There is a need for OEM vendors to push suppliers to bring MRO capacities to India while they are securing orders for fleet expansion. Industry players expect the Government of India to make provisions so that more land can be acquired for the development of additional airport infrastructure, while also mandating that MRO facilities should be a part of them. This being the usual global practice would also attract private players.
Meanwhile, the MRO segment accounts for a minor 15 per cent of the overall market size of the Indian civil aviation industry. Of this, a large portion – 80-85 – is handled offshore in Sri Lanka, Malaysia, the United Arab Emirates and Singapore. Currently, Indian MROs primarily focus on airframe maintenance, which is one of the four segments of the industry. The other segments are engine maintenance, components maintenance, and daily and weekly checks (also called line maintenance). However, the engine and component maintenance segments have large potential for profit, accounting for 50-55 per cent of the work by value. Therefore, the industry needs to step out of its limited scope of work and expand in other areas as well.
Going forward
The MRO industry promises to open up new avenues for the future of the Indian aviation industry, with the number of aircraft projected to rise from 700 at present to 1,000 in the next two years. Revenues from this segment are expected to grow at a compound annual growth rate of 20 per cent, climbing from $2.3 billion at present to $5 billion in the next three to five years, according to the MRO Association of India. There needs to be more emphasis on building better technology for engines, landing gear and major components maintenance. Government support in the form of fiscal incentives for airline companies will be of paramount importance, while the Competition Commission of India must exercise its powers to prohibit monopolistic and duopolistic OEMs in the market and ensure competition in the delivery of services.
