India to become the third largest aviation market in the world by 2024. A rising proportion of middle-income households, healthy competition amongst Low-Cost Carriers, infrastructure buildup at leading airports and supportive policy framework has given a positive push to the aviation sector. In 2010, 79 mn people travelled to/from/or within India. By 2017 that doubled to 158 mn, and this number is expected to reach 520 mn by 2037. With the air passenger traffic projected to increase, the Indian aviation industry is on a high-growth path. India witnessed double digit growth in domestic air cargo of 12.1% in 2018-19 over 2017-18. Total cargo handled reached 3.56MMT.
The nation’s airplane fleet is projected to quadruple in size to approximately 2500 airplanes by 2038. Currently, the country has 130 operational airports including 29 international, 91 domestic, and 10 custom airports. To augment the airport infrastructure the government aims to develop 100 airports by 2024 (under the UDAN Scheme) and expects to invest $1.83 bn in the development of airport infrastructure by 2026.
The Indian Civil Aviation MRO market, at present, stands at around $900 mn and is anticipated to grow to $4.33 bn by 2025 increasing at a CAGR of about 14-15%. The Indian drone industry will have a total turnover of up to $1.8 bn by 2026. The government, in line with its vision, to make India a global drone hub initiated with the PLI scheme for Drone and Drone components providing a total incentive of INR 120 cr and Liberalised Drone Rules 2021.
Up to 100% FDI is permitted in Non-scheduled air transport services, Helicopter services and seaplanes under the automatic route.
Up to 100% FDI is permitted in MRO for maintenance and repair organizations; flying training institutes; and technical training institutes under the automatic route.
Up to 100% FDI is permitted in Ground Handling Services subject to sectoral regulations & security clearance under the automatic route.
100% FDI under automatic route has been allowed in Brownfield Airport projects.
Through the National Civil Aviation Policy 2016 (NCAP) the government plans to take flying to the masses by enhancing affordability and connectivity. It promotes ease of doing business, deregulation, simplified procedures, and e-governance. In April 2020, the Goods and Services Tax for MRO services rendered locally was reduced from 18% to 5%. The ‘place of supply’ for B2B MRO services was changed to the ‘location of recipient’, enabling Indian MRO facilities to claim zero-rating (i.e., export status) under GST laws on MRO services rendered to prime contractor/OEM located outside India. This has been an extremely crucial policy amendment as it will encourage global participation in the Indian aviation sector by allowing foreign MRO operators to subcontract MRO work to Indian entities without any extra tax liability.
Production Linked Incentives (PLI) Scheme
The Central Government under the leadership of Hon’ble Prime Minister Shri Narendra Modi, has approved the Production-Linked Incentive (PLI) scheme for dronesand drone components. The PLI scheme comes as a follow-through of the liberalised Drone Rules, 2021 released by the Central Government on 25 August 2021. The PLI scheme and new drone rules are intended to catalyse super-normal growth in the upcoming drone sector. Last date for submitting the application form is 20th May 2022