MROs: In Dire Need Of Maintenance, Repair, Overhaul

The potential of the MRO business to flourish in India continues to remain on paper. While on the one hand, we do not miss any opportunity to tom-tom the rapid growth of the aviation sector and how the country will be in the top three in the next five years in the world, the MRO industry – one could refer to it as the backbone of the aviation sector — has been totally forgotten by the government. The size of industry in 2015 was ₹5 billion. Today, is the size remains at the same ₹5 billion and as C Santhosh found out, most of the MROs would have to down shutters by March 2019 if the situation does not improve.

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As India’s civil aviation industry continues to grow at a scorching pace, the homegrown Maintenance Repair & Overhaul (MRO) industry appears to have come to a screeching halt. It is a sad state of affairs as industry observers agree that Indian MRO capabilities have the potential to be one of the most competitive in Asia, especially due to the availability of a large and highly-skilled English speaking workforce that is also very cost competitive. Despite the emergence of a strong airline industry that could have provided an impetus to the MRO industry in India, more than 90 per cent of the MRO requirements of Indian carriers are performed out of the country.

“All Indian MROs are heading towards total closure due to highly beneficial tax policies for foreign companies that allow imports at 5 per cent tax and local MROs have to charge Goods & Services Tax (GST) @ 18 per cent. This gives a clear advantage of 13 per cent in reduced tax on imports for foreign MRO versus Indian MRO's. From the information we have, all Indian MROs have declared operating losses in their balance sheets for year ended March 31, 2017. If the Government continues to offer these massive subsidies for foreign companies, it is estimated that total and complete closure of Indian MRO will be successfully achieved by March 31, 2019,” warns Bharat Malkani, CEO of MAX Aerospace, a well-known aviation services company. In effect, according to Malkani, the combination of 18 per cent GST on labour and spares used by Indian MRO firms, effectively subsidises the flight of MRO work from India, to firms based out of the country. As a result, MRO work is now flowing out of India to countries such as Singapore, Sri Lanka, Dubai and China.