Union budget 2026 may grant infrastructure status to aircraft: Report

India currently has more than 800 commercial aircraft in service, a number expected to rise sharply in the coming years.

• Budget 2026-27 may grant infrastructure status to aircraft to boost aviation growth.
• Move may ease airline financing, enabling cheaper aircraft purchase loans
• Infrastructure status may help small airlines and boost lender participation

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The Union Budget for 2026-27 will reportedly consider granting infrastructure status to aircraft under the asset category to support the expansion of India’s aviation sector. As per industry sources cited in a report by the Hindu Business Line, this could significantly ease financing constraints for airlines.

If implemented, the proposal would help airlines raise funds for aircraft acquisition at more competitive rates. Indian carriers have placed orders for more than 1,700 aircraft, underscoring strong growth projection for the sector. However, smaller airlines continue to face challenges in accessing aircraft through leasing arrangements, prompting some to consider outright purchases.

These plans have been constrained by high interest rates and limited willingness among domestic banks to finance aircraft acquisitions.

According to industry executives cited in the report, infrastructure classification could help bridge this gap by allowing airlines to access lower-cost loans, including under the Priority Sector Lending (PSL) framework. The PSL regime, regulated by the Reserve Bank of India, requires banks to allocate a portion of their lending to specified sectors.

Sources cited in the report also stated that the Centre had extended infrastructure status to commercial shipping vessels in the previous Union Budget, addressing concerns around assigning such status to movable assets. This precedent has strengthened the aviation industry’s case for similar treatment of commercial aircraft.

The government is keen to improve access to credit for the aviation sector, particularly for start-up airlines and operators of small-capacity aircraft, states the report. Infrastructure classification would also broaden the lender base, enabling participation from insurance companies and allowing banks to offer longer repayment tenures.

Executives cited in the report stated that the move could encourage a shift from operating leases to finance leases, helping address domestic lenders’ risk concerns and high borrowing costs. They added that eligibility under PSL norms could better align financing structures, while rupee-denominated loans for aircraft purchases could reduce foreign exchange outflows as fleet additions accelerate.

India currently has more than 800 commercial aircraft in service, a number expected to rise sharply in the coming years.