Union Budget 2024-25 laid focus on improving the country’s maintenance, repair and overhaul (MRO) ecosystem for aircraft and ships as well as continue the policy measures which will make India an attractive destination for aircraft leasing and finance.
Finance Minister Nirmala Sitharaman today in her speech outlined that ownership, leasing and flagging reforms will be implemented to improve the share of the Indian shipping industry globally and generate more employment. The government’s effort on undertaking reforms in India’s shipping industry comes at a time when shipping disruptions caused by geopolitical conflicts have led to upside risks to inflation.
In order to promote the domestic aviation and shipping MRO sector, the finance minister announced the move to increase the duration for export of items or parts of foreign origin imported into India for repairs. Currently, foreign components can be imported into India for repairs subject to their reexportation within six months.
“To promote domestic aviation and boat & ship MRO, I propose to extend the period for export of goods imported for repairs from six months to one year. In the same vein, I propose to extend the time-limit for re-import of goods for repairs under warranty from three to five years,” the finance minister said.
The Maritime India Vision 2030, seeks to develop ship repair clusters in the country.
“Changes with respect to enhancement of timelines of export / re-import is a step towards creating India as a MRO hub. Eventually, the idea is to attract foreign shipping and aviation players for repairs in India,” said Samir Kanabar, Tax Partner at EY India.
The finance minister further outlined that the government will seek the required legislative approval for providing an efficient and flexible mode for financing leasing of aircrafts and ships, and pooled funds of private equity through a ‘variable company structure’.
A Variable Company Structure entails the setting up of a corporate entity which is involved in the management of invested funds. India currently does not have a dedicated structure which is focused on funding the MRO sector.
