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IndiaMRO
Aerospace &
Defence
Conference
2015
Background Note
I. MRO in India
1. Indias current fleet size and expected fleet growth over the next decade represents significant
growth potential for MRO service providers. Indian carriers today have around 400 aircraft with
an estimate that Indian airlines will receive 1,740 aircraft in the next 20 years1.
2. At present, India has a relatively younger fleet, with an average age of about 5 years, resulting in
limited heavy maintenance requirements. Going forward, as the fleet ages, the requirements for
advanced checks will increase. With the fleet size of Indian scheduled and non-scheduled
operators likely to double by 2020, the need for a strong domestic MRO industry is critical and
not just desirable.
3. Indias current civilian MRO market size is estimated to be around USD 700 million. The market is
expected to grow at 8 per cent CAGR for the next 10 years to reach USD 1.4 billion by 20252.
Currently, 90 per cent of the MRO spend by Indian carriers is outside of India.
4. In terms of MRO spend by value over different categories; engine overhaul remains the largest
market in MRO segment in India. The figures below show the breakup of MRO spend over
different segments.
Figure 1: MRO spend (in %) in India, by value

Component MRO
16%

Airframe MRO
Engine MRO 24%
60%

Source: KPMG Analysis

5. Indian MRO industry has the advantage of a large market, lower cost of manpower and easily
trainable and deployable manpower. However these are nullified by our self-made problems.
6. Factors such as policy apathy, distortionary taxation structure; cumbersome procedures for
import of components and movement of foreign experts; lack of scale and adequate
infrastructure are some of the issues that have prevented India from becoming an MRO hub. The
royalty charges imposed by airports are a big spoiler.
7. The Indian MRO industry is therefore fragmented and has prevented the development of large
players with an end-to-end services portfolio. Component contracts support airlines to reduce
inventory holding costs, but no single MRO or supplier in India to provide such a massive support.
8. Indian carriers find it more cost effective to fly empty aircraft and crew to overseas MRO hubs.
According to industry sources, merely 10 per cent of the MRO work for domestic scheduled
carriers is carried out in India. MROs in India are currently fighting to survive and hence are
unable to focus on a long term strategies.

1
Boeing estimates
2
KPMG estimates
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II. Policy initiatives by the Government to support the sector
9. The current government has made Make in India as one of its key objectives. Aerospace and
defence is one of the key sectors identified for 'Make in India'. The development of a robust MRO
industry should be a natural follow through.
10. The Ministry of Civil Aviation (MoCA) with support from other ministries of the Government of
India has proposed various reforms in the draft National Civil Aviation Policy (NCAP) 2015
released on 30 October 2015. These include some far reaching proposals such as:
a. Provision of infrastructure status for MRO industry
b. Zero rating of Service Tax on MRO services
c. Exemption of aircraft tools and tool kits from Customs Duty
d. Import of aircraft parts by self-attestation from MRO service providers
e. Extending tax free storage period for aircraft spares by MRO to 3 years
f. Allowing import of unserviceable components for repairs and advance exchange of
serviceable parts
g. Allowing foreign aircraft to stay in India for a period of 6 months
h. Ease of visa issuance for foreign MRO experts
i. Providing temporary landing permits to foreign pilots
j. Declaring MRO as a separate category (instead of clubbing with Ground Handling)
for security procedures
k. Removing restrictions on foreign registered aircraft for MRO work
l. Persuading state governments to make VAT zero-rated on MRO services
m. Providing for adequate land for MRO in all future airports
n. Rationalizing airport royalties and additional levies on MRO service providers
11. The above changes have been welcomed by the entire aviation industry and the MRO industry in
particular. This is the first time when the MRO industry has received such detailed attention in a
policy proposal. It is likely to bring in significant investments, infrastructure, latest technology and
employment over the next 3-5 years.
12. The Ministry of Defence (MoD) is actively engaging with the private players for MRO of defence
aircraft. This opens up a significantly large and sustainable opportunity for the Indian MRO
industry. MoD is willing to train, hand-hold and certify the private players. The industry is
thankful to MoD and is keen to support the Indian defence forces in every possible way.

III. Way forward

13. The draft NCAP 2015 has laid the foundation for a revival in the Indian MRO industry. The MRO
association has provided some suggestions for further improvement and clarification in NCAP
2015. The industry hopes that the proposals will be accepted by the government and the final
NCAP 2015 will be implemented at the earliest.

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 14. The action steps required for making India MRO industry competitive are as follows:
a. Develop the building blocks of a successful MRO supply chain
b. Develop a robust aircraft spare parts warehouse and inventory management
backbone in India
c. Use industry best practices to improve MRO efficiency
d. Develop a successful FAA/ EASA approved Part 121 organization for cabin designing
e. Develop infrastructure to support MRO growth including skilled manpower
15. The above will require the MRO industry to work closely with MoCA, MoD, DGCA, government
agencies, airline clients, aircraft OEMs, component manufacturers and leasing companies. The
MRO Association of India should create a task force to coordinate with the different entities and
address the many challenges that may emerge.

IV. Conclusion
16. India has the potential to be a global MRO hub due to its growing aircraft fleet size, strategic
location advantage, rich pool of engineering expertise and lower labour costs. MRO is critical to
the success of the aviation and defence sector in India. The MRO industry brings in investments,
revenue, taxes and employment and needs to be supported as a priority sector.
17. It is a matter of shame that airlines in India find it cost-effective to fly empty aircraft and crew to
overseas MRO hubs than to get them serviced in India. The good part is that this is due to Indias
self-created problems and hence are reversible.
18. Both MoCA and MoD have taken bold and futuristic policy decisions to support the MRO industry.
It is now up to the industry to make the most of the government support, engage with all
stakeholders and make India a global MRO hub.
19. The IndiaMRO Aerospace and Defence Conference 2015 provides an ideal platform for decision
makers in government and industry to get together and develop a clear action plan with specific
timelines and accountability.

20. Indias time has come. We will get there.

2015 KPMG Advisory Services Private Limited, an Indian member firm of the KPMG
network of independent member firms affiliated with KPMG International Cooperative
(KPMG International), a Swiss entity. All rights reserved
The information contained herein is of a general nature and is not intended to address the
circumstances of any particular individual or entity. Although we endeavour to provide
accurate and timely information, there can be no guarantee that such information is accurate
as of the date it is received or that it will continue to be accurate in the future. No one should
act on such information without appropriate professional advice after a thorough
examination of the particular situation.

Amber Dubey
Partner and Head - Aerospace and Defence
T +91 98719 33711
E adubey@kpmg.com

www.kpmg.com/in
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