In a bid to bolster the aviation industry and establish India as a significant player in aircraft leasing and maintenance, the Indian government has unveiled a series of policy measures in its 2024-2025 budget. These initiatives aim to create a more flexible financing environment for aircraft leasing and enhance the capabilities of the domestic maintenance, repair, and overhaul (MRO) sector.
Finance Minister Nirmala Sitharaman, in her budget speech delivered to the Indian Parliament on July 23, 2024, outlined a strategic approach to encourage aircraft financing and leasing through the creation of a flexible financing system. This system will utilize pooled private equity to offer a variable company structure designed to streamline the process of leasing aircraft and ships. The government will seek legislative approval to implement this efficient and adaptable financing mode, which is expected to attract substantial investment in the sector.
The introduction of a flexible and efficient financing model will significantly enhance our capability to support the aviation industry’s growth and improve our competitive edge in the global market, stated Sitharaman. In a complementary move to support the MRO industry, the government has extended the duration for importing aircraft into India for maintenance work from six months to one year, with the possibility of a further extension of 12 months. This extension is intended to provide more operational flexibility and reduce logistical constraints for MRO providers, thereby fostering a more robust and efficient maintenance ecosystem within the country.
The budget also highlights the government’s commitment to advancing aircraft leasing operations via the International Financial Services Centre (IFSC) located at the Gujarat International Finance Tech City, known as GIFT City. The IFSC is poised to play a pivotal role in this initiative. According to the finance ministry’s economic survey for 2023-2024, over 28 aircraft lessors have already registered with the IFSC, collectively leasing more than 20 aircraft and 49 aircraft engines. Notably, Air India has begun leasing its widebody aircraft from the IFSC zone, and other airlines are in the process of establishing leasing operations within this financial hub.
Established under the International Financial Services Centers Authority Act of 2019, the IFSC is India’s primary center for international financial services. It is strategically designed to enhance the country’s standing in the global finance arena by facilitating international transactions and services, predominantly catering to non-resident entities.
The Indian government’s focus on the MRO sector is part of a broader strategy to elevate India’s position in the global aviation industry. The economic survey indicates that the MRO industry in India has seen significant growth, with the number of MRO providers increasing from 114 to 147 since the announcement of the National Civil Aviation Policy (NCAP) in 2016. Indian MRO businesses are expanding their capabilities beyond traditional airframe maintenance to include engine servicing and other specialized segments in collaboration with global Original Equipment Manufacturers (OEMs). This growth is further supported by the development of new maintenance facilities at various airports, addressing previous infrastructure limitations.
These policy measures reflect the Indian government’s commitment to advancing the aviation sector by improving financial frameworks and operational efficiencies. As India continues to strengthen its position in the global aviation market, these initiatives are expected to drive significant investment and development in both aircraft leasing and MRO activities.
