India's MRO industry seeks strategies to boost size and scale: Chairman & CEO, Aequs

Aravind Melligeri, chairman of Aequs

India's maintenance, repair, and operations (MRO) industry is still waiting for the central government to come out with more long term strategies to help grow the size of the industry in the country, Aravind Melligeri, Chairman & CEO, Aequs told Moneycontrol.

"The industry was expecting concrete measures in the Union Budget for strengthening the Indian supply chain and making it more competitive vis-à-vis its peers in other countries," Melligeri told Moneycontrol in an interview.

He added that the industry has been asking the government for a production-linked incentive (PLI) scheme to boost aerospace component manufacturing and sub-assemblies and encourage companies to invest in R&D and build capabilities, along with tax breaks for aerospace research and development (R&D) and systems development, but so far the industry's pleas have gone unheard.

Melligeri also said that the call for a comprehensive aerospace manufacturing policy should be addressed urgently.

"The call for a comprehensive aerospace manufacturing policy, which takes an integrated approach to nurturing a mature aerospace manufacturing ecosystem in India, should be addressed urgently," Melligeri said.

He added that the Indian civil MRO market size is projected to double from $1.7 billion to $4 billion by 2031, but that there are only a handful of MROs in India and the capacity available is not commensurate with the projected growth in the country’s aviation.

"Apart from the domestic growth, growth of India's MRO industry will also help the country target the international market, particularly for business jets," Melligeri said, adding that at the moment around 80-85 percent of India's MRO demand is serviced overseas.

However, Melligeri said that the budget proposal to extend the period for export of goods imported for repairs from six months to one year, along with another proposal to increase the period for re-import of goods for MRO under warranty from three to five years and the Goods and Services Tax (GST) Council's decision to fix the GST tax on aircraft and engine parts at a uniform 5 percent is a welcome move for the industry.

He also said that there is an increased interest from the aircraft original equipment manufacturers (OEMs) to outsource larger and more complex projects to Indian supply chain companies, but the country's government needs to create a conducive environment for the industry to keep growing.

"There is ample engineering skill available in India which gives it an advantageous position over other developed markets... . Having said that, there is a need to focus attention on further training and upgradation of our workforce to go up the engineering value chain," Melligeri said.

He also said that India's spare parts ecosystem needs to be developed.

"While the government may have little role to play in this respect (developing the spare parts ecosystem in India), the recent proposals in the Union Budget should address this issue to some extent," Melligeri said.

Aequs is a contract manufacturer of aerospace components, toys, and consumer durable goods. The company in October 2023, raised $54 million (Rs 448 crore) in a fresh round of equity funding led by Singapore-based Amansa Capital after raising a round of Rs 225 crore in April 2023 from Amicus Capital.

The company is betting big on the growth of the MRO industry in India as India's airlines have an order book of 2000 aircraft with OEMs.

Last week, Aequs signed an agreement with Canadian aerospace major Magellan to jointly develop an aircraft engine MRO facility at the former’s Belagavi Special Economic Zone in Karnataka.

On July 23, Union Finance Minister Nirmala Sitharaman announced a slew of measures to promote domestic companies involved in MRO of aircraft, boats and ships.

“To promote domestic aviation and boat and 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,” Sitharaman said in her Budget speech.

However, despite the measures announced by the government as part of the Budget, the industry had said that the government should look to come out with more comprehensive measures to develop the MRO industry in the country.

Indian carriers allocate approximately 12-15 percent of their total revenues to MRO services, positioning it as the second-largest expenditure following fuel costs, which account for approximately 45 percent of their overall revenue.

IndiGo had last year told the Ministry of Civil Aviation that Indian MROs should develop additional capabilities, such as nacelle maintenance, engine maintenance, and component support, in line with prominent international MROs.

Approximately 90 percent of IndiGo’s aircraft MRO expenditures are outsourced to foreign companies, leaving only 10 percent of the business for Indian companies, the airline’s engineering head, SC Gupta, had said.