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    Production Linked Incentives Schemes in India
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Roots in the sky: India's Aviation Sector

India’s aviation sector is one of the fastest growing sectors within the country and is unquestionably one of the fastest growing aviation sectors in the world. Contributing $30 billion to India’s GDP annually, our domestic aviation market is projected to be third largest globally by 2024. India’s air traffic is currently snowballing at a rate far quicker than the global average, with our percentage of total passengers and total freight traffic on a steady incline. Investment opportunities in the Indian aviation sector will be raining down hard and fast over the next few years, whether that be the construction/revival of airstrips, private-public partnerships for aviation-based infrastructure, or the expected surge in India’s MRO services. Under the direction of the 2016 UDAN program and the 2020 PLI scheme, the government has vowed to construct 200 more airports by 2025 and also hopes to become a global drone hub by 2030. 

Though the onset and fallout of the COVID-19 pandemic was and has been disastrous for the global aviation industry, India has shown no signs of backing down from its goal of becoming a leader in all things aviation over the next decade. With what seems to be shaping up as a goldmine in the clouds, coupled with the government’s unwavering determination to bolster and transform the sector, it is time we take heed of the developments that are literally occurring in the skies above us. 

Passenger traffic amounted to over 115 million for the financial year of 2021. As per the IATA (International Air Transport Association), India is expected to cater to 520 million passengers by 2037. In order for such numbers to come to fruition, every aspect of the aviation sector is not only going to be improved, but immensely expanded. The total commercial fleet size currently sits at 660 planes; as leaders in the airline industry are banking on the aviation boom, an estimated 1000 new planes are expected to join the fleet over the next two years. The AAI (Airports Authority of India) has set out a development/expansion scheme of INR 20,000 crore for the next five years in order to meet the passenger demand. The Cabinet Committee on Economic Affairs has also approved the revival of unserved and underserved airstrips across the country with a budget of $643 million. 

There is no doubt that the government will be seeking private investment in order to reach its aforementioned goals. The AAI has already initiated a PPP format (public-private partnership) at three airports (Ahmedabad, Lucknow, Mangalore) and they have been awarded to private concessionaires. The adoption of this format is going to become more frequent over the next few years, especially in lieu of all the airports, heliports, and water aerodromes the government intends to construct over the next few years. The economic structure of the aviation sector in India is transforming at a rapid pace, which has enticed several foreign aviation companies to invest into the subcontinent’s aviation market. To name a few who are leading the way and working alongside the AAI; Airbus (France), Boeing (USA), Etihad Airways (UAE), and Fairfax (UK). 

India’s MRO facilities will also have to double in number to serve the influx of airports and airplanes that are cropping up across the country. Simply put, MRO is the umbrella term that includes everything to do with aircraft maintenance and restoration. Not only does the incumbency plan on meeting these needs, it has ambitions of turning India into a MRO hub for aircrafts. The tools used by MRO services in India have now been exempted from customs duty, which will enable the servicing of larger fleets in a shorter time. Foreign aircrafts will also be allowed to stay in the country for a full maintenance period of 6 months, a privilege that was earlier only extended to Indian international and domestic carriers. 

The UDAN scheme (Ude Desh ka Aam Nagrik) is the government’s multifaceted approach to making air travel affordable and widespread, while simultaneously spurring job growth and improving the connectivity between the urban centers and the underdeveloped regions within the country. This scheme will include helicopters for tough-to-access regions (i.e. Himalayan and North Eastern areas in the hills), which will help in medical emergencies and search-and-rescue operations. Furthermore, under the UDAN scheme, the government is keen to introduce more low-cost carriers into the market (the success of low-cost carriers like IndiGo over the past decade is a testament to the growth of the aviation sector), with capped-airfares that are to be subsidized in uncompetitive areas.

Interestingly, the government has been keeping tabs on the drone market too. As of August 2021, PM Modi approved the PLI (Production-Linked Incentive) scheme for drones as well as drone components. The scheme seeks to garner a competitive and self-sustaining drone manufacturing market in the country under the Atmanirbhar Bharat Abhiyan. ₹120 crores has been sanctioned for the drone market (as per the latest PLI for the Auto and Drone industry), with hopes of catalyzing supernormal growth in this upcoming sector. DigiSky is one of the digital initiatives taken on by the DGCA (Directorate General of Civil Aviation) to monitor and encourage growth within the drone sector. The DigiSky online portal streamlines the registration for drones and pilots, while also approving their flight path and providing post-flight analysis. This is to be lauded, as Indian government schemes are not often up to pace with modern technology, let alone do they ever try to stimulate growth in such areas. 

The Indian aviation sector has been booming for years, and barring the relative blip that is the COVID-19 pandemic, it is back on track. Now, this industry is fueled by a government that is willing to do whatever it takes to make India a global hub for everything aviation related. From the restoration of underserved airports, the doubling of the national airplane fleet, and a turn towards a public-private-partnership model, one can say we are laying the seeds for a future wherein it becomes commonplace for the average Indian citizen to fly, much like the average Indian would take a train or take the bus. Heavy foreign investment is an indication that the world is paying heed to the developments in the Indian aviation sector. In light of the lofty goals the ruling party has set, it is now a matter of planning and execution. There is plenty of optimism if one looks at the UDAN and PLI schemes, and India’s plan to become a leader in MRO services shows that we are headed in the right direction. This next decade will determine India’s fate as a bigtime player in the aviation game; we must be both ambitious and pragmatic, as we lay our roots in the sky.