New Delhi, Feb 28: Finance Minister P.Chidambaram Thursday proposed to increase the time period for installation of parts used by maintenance, repair and overhaul (MRO) sector of the aviation business from three months to one year.
Current provisions mandate an MRO to stock spares only for a period of three months after which it has to pay the custom duty.
Similarly, spares have to be accounted for and it has to be ensured that they are used only for the aircraft for which they have been imported for.
“The aircraft manufacture, repair and overhaul (MRO) industry is at a nascent stage. Encouraging the MRO sector will generate employment besides other benefits,” Chidambaram said, presenting the union budget 2013-14 in the Lok Sabha.
According to the memorandum explaining the provisions in the Finance Bill, the time period for installation of parts and testing equipments imported for MRO of aircrafts by units engaged in such activities is being extended from three months to one year.
In the last budget, the then Finance Minister Pranab Mukherjee had exempted custom duty on new, retreaded tyres as well as testing equipment for aircraft which will be imported by third-party MRO units.
These parts and tyres were attracting around 30 percent basic and additional customs duty on import in 2010-11. Due to this, the domestic MRO sector had become uncompetitive.
According to a civil aviation ministry report, the Indian MRO industry is expected to triple in size from Rs.2,250 crore ($440 million) in 2010 to Rs.7,000 crore ($1,369 million) by 2020.
However, this is quite small when compared to present size of per annum MRO business in the UAE ($1,565 million) and China ($1,956 million).