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EMERGING
MRO HUB
With India’s civil aviation sector expanding rapidly,
several international firms are investing in setting up
MRO facilities, writes Rajiv Pai.
T
HE civil aviation sector in India 20.96 million to 32.99 million in the same US$60 million, obliging aerospace partners
has expanded rapidly in recent period. such as Boeing and Airbus to set up units
years, with several new private Growing air traffic implies larger aircraft in, or source materials from, India.
airlines having started opera- fleet and that translates into a lucrative, The offset policy is also designed to
tions, to cater to the growing number of associated business opportunity for India encourage overseas investors to transfer
air travellers. in the form of maintenance, repair and technologies and extend licensing for
While the current economic slowdown overhaul (MRO) facilities. A vital support indigenous production. This will help build
has resulted in many carriers scaling down service for the aerospace industry, MRO up a credible support industry for India
growth plans, the global aerospace sector, has largely been confined to those to eventually emerge as a major aviation
especially aircraft manufacturers, expect countries that are themselves producers manufacturing and assembly hub.
the Indian sector to continue flying high in of commercial aircraft. The country is now moving from parts
the medium and long term. With some deft manoeuvring, India manufacturing to engineering, information
In fact, according to the Ministry is positioning itself to gain a slice of this technology-enabled services and research
of Civil Aviation, domestic air traffic is profitable business. A government policy and development (R&D).
expected to surge from 29.82 million that has proved particularly advanta- Overseas majors are outsourcing
passengers in 2007-08 to 52.32 million by geous relates to offset rules. These rules an increasing amount of work to the
2016-17. Similarly, the number of interna- prescribe re-investment into the country domestic sub-assemblies segment.
tional air travellers is expected to rise from of 30 per cent of all deals valued at over Industry watchers expect large deals and
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Civil Aviation
joint ventures with global aviation majors. specialists on aerospace and defence
India is considered to be one of the practice, the study suggests that while
fastest-growing aerospace markets in
India’s workforce, it is difficult to make projections during
the world and has attracted the interest
of major global companies. The industry
R&D expertise a global recession, from a long-term
perspective, the aerospace industry’s
has an expanding consumer base, and a and its strategic cyclical nature and strategic importance
growing number of airlines, businesses will drive a recovery. It also sets store
and high net worth individuals. All its location make it on emerging markets, particularly India
segments are showing a significant level and China, driving the global civil aviation
of growth, driven by the inherent advan- a potential global sector.
tages that the country has of a well-edu- India’s MRO segment, currently at a
cated and trained talent pool, manpower hub for MRO. nascent stage, is estimated to grow 10
cost competitiveness, liberalised civil per cent year-on-year and reach US$1.17
aviation and defence policies, a strong billion by 2010 and US$2.6 billion by 2020.
domestic manufacturing base, and the The main challenge in positioning India as
presence of specialist capabilities. and R&D expertise, and its strategic an MRO hub, however, comes from the
A newly released study on the MRO location make it a potential global hub for indirect tax structure, specifically customs
industry notes that though activity in the both manufacturing and MRO,” observes duties and service tax.
Indian aerospace industry is primarily the study, ‘Changing Dynamics – India’s As per the study, while the Govern-
driven by public sector units (PSUs), there Aerospace Industry.’ It was undertaken ment of India has undertaken significant
are tremendous opportunities, for both by PricewaterhouseCoopers (PwC) at liberalisation in the investment policy
public and private sectors, in the ‘design the behest of the Confederation of Indian regime, particularly in civil aviation, there
to build’ lifecycle. Industry (CII). remain critical issues, especially in the tax
“India’s engineering workforce, its Drafted by Dhiraj Mathur, Jairaj Puran- regime, that need to be addressed if India
rapidly developing engineering services dare, Vivek Mallya and Nilesh Modi, PwC has to claim its position as an important
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global manufacturing hub in this sector. humidity. Boeing’s first MRO in Asia was and composite materials for Boeing’s
Recognising India’s locational and cost established at Shanghai in China. “We are 787 Dreamliner aircraft. TAL has already
advantages, foreign companies are bullish yet to finalise our requirement, but we commenced operations at the Nagpur
regarding India’s potential as an MRO hub will be recruiting locally as talent is avail- SEZ. Moreover, Boeing has an agreement
and several alliances with local firms have able here and will prove to be cost-effec- with the Indian Institute of Science (IISc)
been announced. tive,” says Keskar. Air India will provide and IT firms Wipro and HCL to develop
International aircraft manufacturers, the technical expertise and support for wireless and other network technologies
including Boeing and Airbus, are investing running the MRO. for aerospace-related applications. Other
large sums in the MRO sector in India. Underscoring Boeing’s deep commit- R&D projects have been conducted with
“Boeing has committed up to US$100 ment to the success of the aerospace companies such as National Aeronau-
million for an MRO centre, US$75 million sector, Keskar maintains the company is tics Ltd and with the Indian Institute of
for a pilot training centre and US$10 million pursuing an integrated enterprise strategy Technology (IIT) Kanpur.
for pilot training grants,” reveals Dinesh to become India’s preferred aerospace and An MRO facility, as the one planned
Keskar, vice-president (sales), Boeing Inc. defence partner and provider. According at Nagpur, gives India-based operators
The MRO facility is planned to be set up at to him, Boeing has had relationships the option of avoiding the higher cost
the Nagpur Special Economic Zone (SEZ), with Indian suppliers since 1991, but is and additional time of flying aircraft and
being developed by the Maharashtra now increasing the pace and depth of its support staff to other countries for sched-
Airport Development Company. A joint engagement not only through its products uled heavy maintenance checks.
venture between Seattle-based Boeing and services, but also via software devel- For example, though Air India currently
and Air India, the centre is expected to be opment, engineering and technology as does minor in-house maintenance work,
operational by 2010. part of its globalisation strategy. it will be able to conduct heavy mainte-
Keskar deems Nagpur a logical choice Boeing also has a deal with Tata Motors nance checks at the MRO centre once it
for setting up the MRO as the dry weather subsidiary, TAL Manufacturing Solutions comes up in Nagpur, instead of getting it
there is conducive for overhauling aircraft, Ltd, for manufacturing floor beams using done abroad.
with parts not prone to corrosion in low new technology with advanced titanium “We hope that other carriers will take
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Civil Aviation
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