New Delhi: The Narendra Modi government will soon unveil measures for aircraft financing and leasing activities in India as it looks to take the country’s aviation market out of its current mess and make it self-reliant.
Finance Minister Nirmala Sitharaman announced this in her maiden Union Budget Friday. “Time is ripe for India to enter into aircraft financing and leasing activities from Indian shores,” Sitharaman said, adding that this was critical to the “development of a self-reliant aviation industry” and creating “aspirational jobs in aviation finance, besides leveraging the business opportunities available in India’s financial Special Economic Zones (SEZs)”.
“For providing an enabling ecosystem for growth in India of Maintenance, Repair and Overhaul (MRO) industry, it is proposed to leverage India’s engineering advantage and potential to achieve self-reliance in this vital aviation segment,” the minister said, adding, “Government will adopt suitable policy interventions to create a congenial atmosphere for the development of MRO in the country.”
The proposal set off a debate among aviation experts, with some hoping it will help prop up an ailing industry while others saying they just couldn’t see such a scheme take off.
Captain Mohan Ranganathan, a former Boeing 737 instructor, pointed out that aircraft financing and leasing activities are in US dollars, adding, “Budget cannot provide foreign exchange for this. I really don’t see this taking off, going by the poor rating India has on leased aircraft.”
India’s civil aviation industry has been reeling under several challenges of late. In May 2019, one of India’s largest airlines, Jet Airways, went under. Air fares have risen across the board, passenger traffic growth has plateaued at 0.14 per cent, and dozens of new Airbus A320 Neo and Boeing 737 MAX aircraft have had to be grounded due to worldwide technical issues.
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Aviation analyst Amit Singh, the former head of operations and safety at Air Asia who is currently the chief of training at IndiGo, was more optimistic.
“Around 81 per cent of aircraft in India are leased. This compares with a leased aircraft average of 52 per cent for Asia, and 53 per cent globally,” Singh said. “With most of the companies going for sale and lease-back option, this move will be a shot in the arm for Indian finance and leasing companies.”
On Sitharaman’s announcement regarding policy interventions to cultivate an MRO ecosystem in India, Singh added, “Airlines will benefit from this if they are looking at (setting up) their own leasing company. With the maintenance, repair and overhaul (MRO) getting a boost in the Budget, the aviation industry will be self-reliant. Leasing and major maintenance is currently draining a lot of money to benefit foreign companies.”
Among other major announcements, Sitharaman talked about the setting up of more airports under UDAN, the regional airport development and connectivity scheme, and re-initiation of Air India’s strategic disinvestment.
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