 "Sports regulatory board will ensure good governance: Mandaviya on NSG Bill")
India’s defence maintenance, repair, and overhaul (MRO) sector is poised for transformative expansion over the next five years, as global aerospace giants and domestic players collaborate to establish world-class facilities. With companies like Lockheed Martin and Boeing partnering with Indian firms like Tata Advanced Systems Ltd (TASL) and AI Engineering Services Ltd (AIESL), the foundation is being laid to establish India as a regional hub for military aviation maintenance.
Backed by policy reforms and a maturing industrial base, the sector's transformation over the next five years will feature new MRO facilities, increased induction of defence platforms for in-country maintenance, and a growing role of local suppliers supporting global defence original equipment manufacturers (OEMs).
The ‘prove-it’ phase
Nick Smythe, director of Air Mobility and Maritime Missions International Campaigns at Lockheed Martin, describes the coming five years as a “prove-it” phase for India's defence MRO capabilities. He also notes that the recent spate of announcements in the sector by global OEMs like Dassault Aviation, Boeing, and his own company are “lagging indicators” of years of planning and effort, aligning with the government’s ‘Make in India’ vision.
Lockheed, in partnership with TASL, plans to establish an MRO facility for the C-130J Super Hercules aircraft, with the first induction for maintenance scheduled for 2027. “This is the culmination of years of work. The conversations with the Indian Air Force (IAF) go back to 2019. Initially, it was easier to send aircraft outside India for maintenance, but the industrial setup here is now mature,” says Smythe. “The stable, consistent government vision allows us to do long-term planning. The number of assets and our throughput analysis justify the investments, making it clear that now is absolutely the right time to move forward. We are excited to partner with Tata to establish this capability.”
Lockheed's facility will also support the US government's regional support framework, ensuring military assets transiting through the Indo-Pacific theatre can undergo MRO within the region.
Also Read
Boeing, too, is preparing to scale its operations in India. Salil Gupte, president of Boeing India and South Asia, emphasises the growing scope of MRO services for defence platforms. “The foundation for defence MRO expansion over the next five years is already in place. Critical and technical work, including heavy maintenance for commercial platforms like the 737 Max airliner, and defence platforms like the P-8I maritime patrol aircraft, is already being carried out in India. The focus now is on scaling these capabilities further,” he says.
Boeing in August announced a partnership with AIESL to enhance local MRO capabilities for the Indian Navy's 12 P-8I aircraft, providing in-country overhaul services for critical components. This collaboration has already achieved a milestone with the first P-8I landing gear maintenance at INS Rajali.
While precise figures are not yet available, investments in defence MRO during this period are expected to be substantial, likely in the multimillion-dollar range.
“The surge in defence MRO will enhance Indian suppliers’ capabilities for future co-production and co-development programmes. As new initiatives are launched, their role in MRO for specific systems, subsystems, and co-developed products will grow, further boosting India's contribution,” adds Gupte.
Prabhat Bhagvandas, chief executive officer (CEO) of Rosell Techsys Inc and advisor at Rossell Techsys Ltd, underscores the sector's potential, with the defence MRO market projected to expand at a compound annual growth rate (CAGR) of 8 to 10 per cent over the next five years. “With global OEMs like Boeing and Lockheed announcing plans to establish MRO facilities, Indian suppliers are well positioned to meet the rising demand for quality components, services, and local expertise,” he explains. Based in Bengaluru, Rossell Techsys supplies to leading OEMs like Boeing, Lockheed Martin, and Honeywell.
Ajay Kumar, former defence secretary, attributes the sector's current momentum to broader developments in aviation. “Growth in commercial and civil aviation MRO has helped scale up defence MRO. Along with this, tax reforms and policy support have contributed to the momentum,” he says, adding India has a chance to become a regional hub for both civil and defence aviation MRO.
India's MRO sector, spanning defence and civil aviation, is currently valued at $2 billion. On July 15, Union Civil Aviation Minister Kinjarapu Ram Mohan Naidu announced a uniform 5 per cent Integrated Goods and Services Tax (IGST) on all aircraft and engine components, effective immediately. He stated that the new policy would foster growth within the MRO sector, which he projected to grow to $4 billion by 2030.
Challenges ahead
Although the outlook is promising, some hurdles remain. Despite initiatives such as the National Civil Aviation Policy 2016, MRO Guidelines 2021, and GST rationalisation underscoring the government's commitment to developing India as a regional MRO hub, some concerns like infrastructure limitations, access to credit, streamlined licensing, and integration into global value chains still need to be addressed. Bhagvandas notes: "Resolving these issues is crucial for creating an enabling ecosystem that allows Indian MRO players to thrive on the global stage.”
Achieving the necessary scale to sustain operations is another challenge. Gupte highlights the importance of maintaining a steady base load for MRO facilities. “The next step is to further scale these capabilities, potentially through government-to-government agreements like a Reciprocal Defence Procurement agreement with the United States (US). Reaching the necessary scale will be vital for expanding MRO operations and maintaining a consistent workload for both commercial and defence sectors."
Towards a new era
Industry players highlight that the next five years will be pivotal for India's defence MRO sector as it transitions from planning to execution. Success will depend on the timely completion of facilities, efficient induction of platforms, and the ability to scale operations. Backed by strong policy support, strategic collaborations, and a growing local ecosystem, India possesses the building blocks to establish itself as a regional hub for defence aviation maintenance.
RECENT ANNOUNCEMENTS
September 2024:
> Dassault Aviation announces it will create Dassault Aviation MRO India (DAMROI), a Noida-based subsidiary dedicated to military MRO for the IAF
> Lockheed Martin and TASL sign a teaming agreement to explore setting up an MRO facility in India for the IAF and global C-130J fleets
August 2024: Boeing and AIESL partner to provide in-country critical components MRO for the Navy's P-8I fleet
POLICY BOOST
GST
> Uniform 5% IGST on imports of aircraft parts components, testing equipment, tools and tool-kits, irrespective of HSN classification
> GST on MRO reduced from 18% to 5% with full Input Tax Credit from April 1, 2020
> Transactions sub-contracted by foreign OEMs/MRO to domestic MRO treated as 'exports' with zero-rated GST from April 1, 2020
Budget 2024-25
> Period for export of goods imported for repairs extended from six months to one year
> Time limit for re-import of goods for repairs under warranty extended from three to five years
MRO Guidelines 2021
> Royalties abolished; transparency, certainty in land allotments for MRO at the Airports Authority of India airports
FDI
> 100% foreign direct investment permitted via automatic route for MRO