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Indian Aviation, flying high
A rising proportion of middle-income households, healthy competition amongst Low-Cost Carriers, infrastructure buildup at leading airports and supportive policy framework has given a positive push to the aviation sector
In 2010, 79 mn people traveled to/from/or within India. By 2017 that doubled to 158 mn, and this number is expected to treble to 520 mn by 2037. With the air passenger traffic projected to increase, the Indian aviation industry is on a high-growth path. India witnessed double digit growth in domestic air cargo of 12.1% in 2018-19 over 2017-18. Total cargo handled reached 3.56MMT.
To satisfy the current and projected rise in demand for commercial air travel, Indian airlines have placed large orders for aircraft. The nation’s airplane fleet is projected to quadruple in size to approximately 2500 airplanes by 2038.
Currently, the country has 130 operational airports including 29 international, 91 domestic, and 10 custom airports. To meet the growing demand for air travel in India, it has become imperative to increase the capacity of airport infrastructure.
To augment the airport infrastructure the government aims to develop 100 airports by 2024 (under the UDAN Scheme) and expects to invest $1.83 bn in the development of airport infrastructure by 2026.
The projected upsurge in air travel in India would require more aircraft usage, thus, in turn, igniting the demand for Maintenance, Repair & Overhaul (MRO) services. The Indian Civil Aviation MRO market, at present, stands at around $900 mn and is anticipated to grow to $4.33 bn by 2025 increasing at a CAGR of about 14-15%.
The Indian drone industry will have a total turnover of up to US$ 1.8 billion by 2026 as the government has given a major boost to the sector with the PLI scheme and the liberalised.
Airports Authority of India (AAI) has awarded 948 routes, from which, 405 routes involving 65 airports including eight heliports and two water aerodromes have been operationalised under UDAN as of 9 March 2022.
The number of airports, helipads and water aerodromes was only 74 prior to 2014-15. As on date the number has gone up to 140 and is targeted to increase to 220 by 2024-25.
Up to 100% FDI is permitted in Non-scheduled air transport services under the automatic route.
Up to 100% FDI is permitted in helicopter services and seaplanes under the automatic route.
Up to 100% FDI is permitted in MRO for maintenance and repair organizations; flying training institutes; and technical training institutes under the automatic route.
Up to 100% FDI is permitted in Ground Handling Services subject to sectoral regulations & security clearance under the automatic route.
100% FDI under automatic route has been allowed in Brownfield Airport projects.
FDI inflows in India’s air transport sector including air freight, reached $2.95 Billion between April 2000 and March 2021.
For further details, please refer FDI Policy
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Under three rounds of bidding of RCS- UDAN 106 airports/waterdromes and 31 heliports have been awarded. Out of these 44 RCS airports have been operationalized as on 24th Jan 2020. Also total 248 RCS routes have commenced so far.
The number of PPP airports is likely to increase from five in 2014 to 24 in 2024.
The union government announced Drone Shakti in the Budget 2022 with the aim of facilitating and promoting drones as a service through startups.
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Industry Scenario
The rise in demand for air travel in India has necessitated the development of a robust ecosystem and supportive government policies.
Through the National Civil Aviation Policy 2016 (NCAP) the government plans to take flying to the masses by enhancing affordability and connectivity. It promotes ease of doing business, deregulation, simplified procedures, and e-governance.
The Regional Connectivity Scheme or UDAN (‘Ude Desh ka Aam Nagrik’) is a vital component of NCAP 2016. The scheme plans to enhance connectivity to India's unserved and under-served airports and envisages to make air travel affordable and widespread. Under the scheme 10 airports were operationalised, 335 routes awarded covering 33 routes and more than 2500000 passengers were flown in 2019. In third phase of UDAN, the civil aviation ministry introduced seaplane operations from water aerodromes. So far 14 water aerodromes have been identified in the states of Gujarat, Assam, Telangana, Andhra Pradesh, Andaman and Nicobar Islands and Lakshadweep.
The National Civil Aviation Policy (NCAP) significantly covers the MRO industry and specifically focuses on easing the pain points that have traditionally impacted the Indian aviation sector. In April 2020, the Goods and Services Tax for MRO services rendered locally was reduced from 18% to 5%. The ‘place of supply’ for B2B MRO services was changed to the ‘location of recipient’, enabling Indian MRO facilities to claim zero-rating (i.e., export status) under GST laws on MRO services rendered to prime contractor/OEM located outside India. This has been an extremely crucial policy amendment as it will encourage global participation in the Indian aviation sector by allowing foreign MRO operators to subcontract MRO work to Indian entities without any extra tax liability.
The aircraft leasing and financing businesses are operated from the International Financial Services Centre (IFSC) and GIFT City provides the off-shore status for financial services. Read More
MOCA released Krishi UDAN 2.0. The Scheme lays out the vision of improving value realization through better integration and optimization of Agri-harvesting and air transportation and contributing to Agri-value chain sustainability and resilience under different and dynamic conditions. The scheme will be implemented at 53 airports across the country mainly focusing on Northeast and tribal regions and is likely to benefit farmer, freight forwarders and Airlines. The Ministry of Civil Aviation plans to pilot the scheme for 6 months, and, will introduce amendments based on results of the evaluation & consultations with other stakeholders.
Monetising Assets: AAI has formed joint ventures in seven airports. Recently, it awarded six airports — Ahmedabad, Jaipur, Lucknow, Guwahati, Thiruvananthapuram, Mangaluru — for operations, management and development under PPP for a period of 50 years. As per National Monetisation Pipeline (NMP), 25 AAI airports have been earmarked for asset monetisation between 2022 and 2025.
GROWTH DRIVERS
NABH (NextGen Airports for Bharat)
Nirman is a government initiative to expand airport capacity more than five times to handle a billion trips a year, in the next 10-15 years.
GIFT City Advantage for Aviation Sector
Aircraft Leasing and Tax Incentives available in GIFT city
Regional connectivity Scheme
Boost air connectivity to smaller cities & northeast states
Production Linked Incentive (PLI) Scheme
The Central Government under the leadership of Hon’ble Prime Minister Shri Narendra Modi, has approved the Production-Linked Incentive (PLI) scheme for dronesand drone components. The PLI scheme comes as a follow-through of the liberalised Drone Rules, 2021 released by the Central Government on 25 August 2021. The PLI scheme and new drone rules are intended to catalyse super-normal growth in the upcoming drone sector. Last date for submitting the application form is 20th May 2022
INR 120 cr
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