View from India: New aviation prospects propel country forward

The aviation industry in India is at an exciting juncture. Wings of opportunities could spread far and wide as India has forged landmark deals with US aviation companies.

The new opportunities are the outcome of Indian Prime Minister Narendra Modi’s recent visit to the US at the invitation of President Joe Biden and the First Lady Jill Biden.

GE Aerospace and Hindustan Aeronautics Limited (HAL) have forged ties to produce fighter jet engines for the Indian Air Force (IAF). GE Aerospace’s memorandum of understanding (MoU) with HAL is to produce fighter jet engines for the IAF. This could lead to a joint production of GE Aerospace’s F414 engines in India.

“The decision by General Electric to manufacture engines through technology transfer in India is a landmark agreement. This will also open up new employment opportunities in both the countries,” said Modi. Employment opportunities in both countries could unfold, giving better clarity on defence cooperation. To think of it, the defence industries and start-ups of both countries are integral to this cooperation. Linking them together is the main objective of India’s Defence Industrial Roadmap.

Coming to the F414 engines, media has reported that it offers unrestricted engine performance on demand, with rapid engine throttle response and zero throttle restrictions. The design is such that the afterburner is not just light but also has great stability. This combination makes it capable of giving extra thrust depending on the requirement. The GE F404 engine was developed in the 1970s: the GE F414 is the latest iteration.

Seen in the Indian context, GE Aerospace has had a four-decade association with India. It has a footprint in various segments including engines, avionics, services, engineering and manufacturing. Naturally, it has a strong foothold in the domestic market. Even as early as 1986, GE joined with the Aeronautical Development Agency and HAL for developing India’s Light Combat Aircraft (LCA). Its support came in the form of F404 engines.

GE’s India presence is represented by the John F. Welch Technology Centre, the company’s research and technology centre established in Bangalore in 2000. It also has a multi-modal factory that began in Pune in 2015.

The state of Karnataka, with its capital city Bangalore could be seen as a forerunner in the aerospace & defence (A&D) industry in India. This may be because of the presence of defence public sector undertakings. In the 1940s, HAL was formed. The 1950s saw the initiation of Defence Research and Development Organisation (DRDO); Bharat Heavy Electricals Limited (BHEL), and Bharat Electronics Limited (BEL). The 1960s saw the establishment of the Indian Space Research Organisation (ISRO). These, along with 2,000 MSMEs and aerospace component makers, have contributed towards making Karnataka an A&D hub. This has attracted investment: both inter-state and those of global stature.

Other highlights unfold. India’s Space Policy of 2023 could facilitate enhanced commercial collaboration between the US and Indian private sectors in the entire value chain of the space economy and to address export controls and facilitate technology transfer. This could be an enabler as India has signed the Artemis Accords, a US-led alliance for facilitating international collaboration in planetary exploration and research.

India has also inked another significant aviation deal in the US: Indian carrier Air India has entered into an agreement with Boeing to acquire over 200 aircrafts. Boeing has a major role to play in the aviation sector in India. This also includes the maintenance, repair and overhaul of aircrafts.

All these developments in the aviation industry seem perfectly timed. CRISIL’s press release of June 2023 forecasts that MRO services revenue could leap threefold over the next five fiscal periods. Revenue of domestic maintenance, repair and overhaul (MRO) services providers is expected to triple to between 5,500 crore rupees and 6,000 crore rupees by fiscal year 2028 from around 1,800 crore rupees currently.

This projected growth may be attributed to the strong growth in domestic civil aviation, government support and ongoing MRO capex (capital expenditure) at airports. It’s probably also because the government has brought out a slew of industry-friendly policies.

“The government has introduced several policies over past year to realise its vision of making the country a global MRO hub. The upshot of these will be a 10-20 per cent reduction in the overall cost of MRO services,” observed Varun Marwaha, associate director, CRISIL Ratings.

These include reducing Goods and Services Tax (GST) on MRO services from 18 per cent to 5 per cent; land lease via open tenders instead of predetermined rates, which should help reduce rental costs; abolishing the 13 per cent royalty charged by government authorities on revenue; and allotting land to MRO service providers for 30 years instead of the current timeframe of three to five years. Capacity additions have already begun in airports of Delhi and Bangalore with dedicated MRO facilities for select private airlines. Let’s hope this segment takes off in a big way.

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