Domestic MRO Industry in a state of distress; Post GST MRO Imports rise to 90%

MAOI Petitions Ministry For Level Playing Field

Mumbai, January 2019: The MRO Association Of India (MAOI) in a letter to the Ministry of Civil Aviation has called for its urgent attention to the dwindling Maintenance, Repairs & Overhaul (MRO) industry. Declaring the industry’s present state to be in dire straits, the Association has appealed to the Ministry to offer the Indian MRO industry at least a fair chance to compete with foreign MROs that enjoy a favorable import tax policy of the Indian Government. The MAOI has stated that the lopsided tax policies have led to 90 percent of the MRO requirements of India being imported; causing severe loss to the Indian MRO industry and the Government’s tax revenues. With the Government’s timely intervention and support, the MAOI aims to convert today’s US $1.4 Billion of net import of MRO into a US $5 Billion export in the next 5 years.

“The Indian MRO business has been on a gradual decline and for the first time in its history has registered negative numbers this year. We cannot stress enough on the plight of our industry and are hoping for the Government to intervene before it’s too late. It is estimated that the current MRO import bill for the year 2017-2018 of US $1.4 billion will rise to the US $3 billion by 2023. This import driven policy has lost 90,000 direct jobs to countries like Sri Lanka, Singapore, Thailand, France, and Germany. These jobs can easily be brought back to India by correcting the fiscal tax imbalance that has affected this industry since independence. Indian engineering is amongst the best in the world and allowing this drain of precious skill and ForEx to foreign locations is unwarranted,” says Mr. Bharat Malkani, President, MAOI.

The Association has pointed out to the skewed tax regime that has been benefiting foreign players while putting the domestic players at a disadvantage. The present GST for importing MRO services to India is levied at a maximum of 5 percent, whereas the same services offered at home are taxed at GST of 18 percent. This makes it unviable for Indian airline carriers to even consider us for doing the job.

“Maintenance, Repair, and Overhaul of aircraft, its components and engines globally are regarded as a strategic business, and the skills required to support Civil as well as Military aircraft are similar. The Indian civil aviation industry is in the midst of a boom with a consistent 20 percent growth rate for the last few years. Based on data from the OEM’s, the current fleet of 550 airliners is expected to grow to 1000 by 2023,” says Mr. Ravi Menon, Vice-President, MAOI.

The MAOI has also pointed out to the fact that despite the Government opening up 100 percent FDI; no foreign player has bought into it. The subsidizing of imports by offering the nation’s MRO to foreign MRO companies gives them no reason to invest directly in India when they are profitable operating from their own countries.

“The ability of a nation to perform its aviation’s MRO within the country is imperative to ensure the sovereignty of its air power. To achieve this, we must evolve a tax and regulatory mechanism that rewards Indian MROs as opposed to penalizing them as it stands today,” concludes Mr. Malkani.

 

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