MAKE IN INDIA – MRO Makes it Happen

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With the shift towards ‘Make in India’ initiative, a new wave of opportunities have arisen for several major industries including the electronic manufacturing, automobile industry, and to the most the aviation industry which is growing rapidly across the board. Pinning up to this self-generating campaign, it is a high-rise for the Indian MRO businesses as growth in aviation sector accentuates demand for MRO facilities. Currently, the MRO market in India constitutes a share of around USD 750 million and as per Boeing, it is expected to increase at 7 percent compound annual growth rate (CAGR) for the next seven years reaching to USD 1.2 billion by 2020. The aircraft line-up is to be double of what is at present by 2020 which will call for a more sophisticated MRO industry in-line with the high growth statistics. Observing the intense demand from the manufacturing side, many major players have come forward to take a leap in time. Sources noted that Prime Minister Narendra Modi has realistically urged industry players to enter defence and aerospace manufacturing, signalling that, it is a priority segment under the ‘Make in India’ policy. Indian Air Force (IAF) is also looking forward for its Maintenance Command Units to participate in the potential areas of the Indian MRO market. It is expected that IAF would spend around USD 18.79 billion for MRO and related activities by 2025 and, at present, the work is getting overburdened on HAL alone in the civil MRO market. Hence, a thorough framework is needed to build up a converged interface between private and civil MRO that will enhance capabilities in the defence sector. The Indian civil aviation MRO market is estimated to grow at a CAGR of about 14-15 percent to USD 4.33 billion by 2025. Till now state-owned Hindustan Aeronautics Limited (HAL) was the only aircraft manufacturing company in India but as the stage is widening, the count is also increasing with major players joining in the MRO expertise. The latest entry of Reliance Defence and Aerospace (RDA) into the defence and aerospace sector has provoked an understanding and confidence in the industry also, fuelled by the ‘Make in India’ policy. RDA has proudly announced themselves as military helicopter manufacturer and integrator with a plan to develop a USD 1 billion Dhirubhai Ambani Aerospace Park (DAAP), led by Rajesh Dhingra, former Managing Director of Lockheed Martin India. It will be India’s first integrated facility, to be located at Nagpur, Maharashtra, in aerospace structure, engine design and manufacture, fabrication and platform integration in the country. The group is also planning to explore other opportunities is in the naval platforms, air mobility, avionics and Network Centric Welfare (NCW). The group is eyeing on closing potential projects worth USD 22.8 billion in the defence sector. According to Anil D Ambani, Reliance Group Chairman, “The ‘Make in India’ initiative of the government provides a perfect landscape for setting up of a comprehensive defence industrial base in the country. The Reliance Group is committed to contribute significantly to this initiative.” The changing trend and complexity of airframes, systems, engines and related components are leading to timely quality checks and inspections, leading to high demand for MROs. In India, the MRO market is undergoing a drastic change, presently estimated at USD 800 million and steadily growing at around 8 percent annually in the coming years. According to Ernst & Young study, this is estimated to grow at an average rate of 15 percent annually, i.e. almost double. Despite the steady growth, most of the players in the aviation sector rely on MROs abroad for maintenance and repair due to inadequate arrangement, lack of infrastructure and cumbersome regulatory policies in India. Another crucial factor is the high service tax, currently 12.36 percent, in the MRO industry that increase cost of services and weakens the service share of the MRO market. Royalty charges and high taxes at airports impact the levies in India up to 50 percent which is higher than the global average and limit the domestic companies to benefit from the potential of the MRO business. Currently, Indian airlines are depending for MRO work of around USD 700 million on firms abroad each year and this huge loss of revenue can be saved and retained in the country by having a more sophisticated and strong MRO industry. But this is changing as initiatives like ‘Make in India’ and infrastructure development through more private participation are aiding to a more organised, integrated and extensive MRO industry in India. In an interview with MRO Business Today, H.R. Jagannath, CEO, Air India Engineering Services Limited (AIESL) noted the huge contribution of Make in India in MRO industry stating that, “In the global scenario MRO market is dominated by North America (34 percent of total MRO market), Western Europe (27 percent of total MRO market), Asia Pacific (17 percent of total MRO market). Captive work load available in the subcontinent, competitive labour rate, state-of-the-art MRO capability and highly skilled manpower definitely contribute substantially to meet the Make in India work in MRO industry.” As a part of MRO industry expansion, Government of Gujarat has planned to develop a fully-equipped one-stop MRO facility near to the proposed Dholera International Airport as a MRO hub in the region, offering low-cost, high-quality services to spare parts and aircraft manufacturer, airlines and other businesses in the industry. Furthermore, MROs are focusing more towards capacity expansion for handling biggest commercial aircraft with advanced configuration composed of latest technology and tooling, like the one in Nagpur which is intended to be developed as the Major International Aviation hub. With enormous potential observed and tapped by the government in the MRO sector, policies have been leveraged to be more favourable towards this sector leaving the question of who will take the advantage with the early entry into the market. This sector is even open to international players as the government is now allowing 100 percent foreign direct investment (FDI) in the MRO sector that let foreign players to gush in to exploit the potential of the market and expand their businesses.
Consultations from MRO industry representatives:
·         Abolish service tax that is currently at 12.36 percent
·         Bring imports of spare parts for MRO work  under the ‘Deemed exports’       category
·         Increase duration of imported aircraft spares that can be kept in storehouses without being taxed to three years
·         Cut in royalty charged by airports for usage of space for MRO facilities.
* Existing MROs in India:
MRO Name Location Types of MRO Services
Indamer Mumbai Line Maintenance. Maintenance schedules and phase inspections.
Air Works Mumbai (Additional small facilities at Delhi, Jaipur, Ahmedabad, Chennai, Pune, Hubli, Coimbatur and Hyderabad) Engine, Line maintenance, Heavy maintenance and Defence MRO. It provides services including maintenance of airframe, line maintenance, component maintenance and level of engine maintenance.
Max Aerospace & Aviation Ltd. Mumbai (Juhu Airport)  - Avionics, electrical and airframe services.
HAMCO (Hyderabad Aircraft Maintenance Company) Hyderabad Presently line and component maintenance. Also, planning for developing a one-stop MRO offering with all-in-one service. Avionics, electrical and airframe services, simulation and manufacturing services. Developing Aero Zone in Hyderabad which would provide one-stop MRO facility.
HAL Bangalore Line and engine maintenance. Overhaul and repair facility relating to engine segment.
Air India Air Engineering Service Limited (AIESL) Mumbai Maintenance, Overhaul and repair facility. Maintenance services for aircraft, engines and components.
* Emerging MRO facilitators in India:
MRO Name Location Types of MRO
Jet Airways Bangalore Maintenance and engineering facility.
Lufthansa – technical of Germany with GMR group Hyderabad -
Air India Nagpur, Maharashtra -
Thales International Gurgaon -
Taneja Aerospace & Aviation Ltd. Pune -
TAAL Mumbai MRO and aviation park.
Sabena Technics of TAT Group, France Hosur, Tamilnadu Manufacturing of components and maintenance.
Airbus Nashik -
SIA Engineering of Singapore with Wadia group Location not decided yet -
HAL and Pratt and Whitney Canada (P&WC) Bangalore Engine maintenance.
Air Works Hosur Engine and heavy maintenance.
List of major foreign investors in the Indian aviation industry:
  • Reliance
  • Airbus (France)
  • AirAsia (Malaysia)
  • Rolls Royce (UK)
  • Frankfurt Airport Services Worldwide (Germany)
  • Honeywell Aerospace (USA)
  • Malaysia Airports Holdings Berhad (Malaysia)
  • GE Aviation (USA)
  • Airports Company South Africa Global (South Africa)
  • Alcoa Fastening Systems Aerospace (USA)
There are three types of services providers in the MRO market, namely - Original Equipment Manufacturers (OEMs), Aircraft Operators and Independent Service Providers. Original Equipment Manufacturers (OEMs) play a vital role in the MRO market and significantly determines for a more sustained progress of the industry. But the Indian MRO market structure is mainly dominated by Independent Service Providers that focus only on aircraft maintenance. But with the stronghold growth of the Indian aviation industry, to be third largest by 2020, OEM-giants like Boeing, Lockheed and General Electric have shown their increasing interests in the Indian aviation industry. A strong example is the world’s leading MRO market of Singapore enjoying 25 percent of Asian market share as it is home to OEMs from all over the globe. The Indian air cargo industry will also benefit from evolving MRO industry as it will directly contribute to heavy machinery and spare parts import demand and save high cost incurred when aircraft MRO work is outsourced aboard. In-house servicing facility means faster recovery of aircraft domestically and reduced dwell-time adding to cargo throughput. With international players setting up their MRO facilities in India, this will benefit in more foreign earnings driving more international and domestic airlines into the country. On a global average, it is recently estimated that the Indian MRO industry will have a potential of USD 30 billion by 2020.  
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