Daily Current Affairs 15 July 2024 – IAS Current Affairs
Current Affairs 15 July 2024 focuses on the Prelims-Mains perspective. Major events are :
Aircraft Maintenance Repair Overhaul Industry
Source: PIB
GS III: Effects of liberalization on the economy, changes in industrial policy and their effects on industrial growth
Overview
- News in Brief
- Uniform IGST
- Aircraft Maintenance Repair Overhaul Industry
Why in the News?
India Implements Uniform 5% IGST on Aircraft Parts to Boost Domestic MRO Industry, Aims for Global Aviation Hub Status.
News in Brief
- Union Civil Aviation Minister Kinjrapu Rammohan Naidu has announced implementing a uniform IGST rate.
- The decision marks a significant milestone for India’s Maintenance, Repair, and Overhaul (MRO) industry.
- It is a global aviation hub as it will reduce operational costs, resolve tax credit issues and attract investment.
Uniform IGST
- Introducing a uniform 5 per cent IGST rate on MRO items is a major boost for the aviation sector.
- Previous GST Rates and Challenges
- Previously, the varying GST rates of 5 per cent,12 per cent, 18 per cent, and 28 per cent on aircraft components.
- This creates challenges, including an inverted duty structure and GST accumulation in MRO accounts.
- Highlighting the prospects Indian MRO industry is projected to become a $4 billion industry by 2030.
Aircraft Maintenance Repair Overhaul Industry
What are the components?
- The OEMs, airline operators, suppliers, makers of parts and spares, and service providers make up the Maintenance, Repair, and Overhaul (MRO) ecosystem.
- MRO services are categorized into four major segments
- Line
- Components
- Engines
- Airframes
- Engine and APU Maintenance constitute almost 60% of the total MRO outlay.
- Engine and APU maintenance is majorly done in the USA.
Indian MRO Industry
- India’s civil aviation industry, with a market size of USD 900 million.
Indian MRO Industry Projection - India is the world’s third-largest domestic aviation market – with a domestic traffic of 275 million.
- It is expected to surpass the United Kingdom (UK) to become the third-largest air passenger market.
- In India, airlines spend around 12 to 15% of their overall revenues on maintenance.
- Engine and component repairs account for over 60%-70% of MRO costs.
- Indian MRO Industry registered a CAGR of 8.9% as compared to the global average of 5.9%.
Fact base for Potential MRO in India
- Rising demand as a result of growing fleet size
- MoU between Air India Engineering Services Ltd. (AIESL) with Pratt & Whitney to launch a joint engine MRO facility in Mumbai.
- The venture between Wadia Group and SIA Engineering Company has been a key development in the sector.
- Availability of low-cost, English-speaking diverse pool of engineers
- India is globally recognized for its strong engineering curriculum.
- Labour cost which forms a considerable share of the overall cost in airframe and component maintenance.
- Prevalent sale and lease
- Redelivery maintenance is an important aspect of an airline.
- This is a big opportunity for component repair as well as heavy maintenance.
- Due to several legal and technical restraints, this is currently done largely outside India.
Advantages of a Flourishing MRO Market in India
- Addressing MRO demand of the increasingly growing Indian fleet.
- Economic benefits such as lower costs, reduced turnaround time, less inventories, etc.
- Addressing MRO demand of global fleet and competing with the MRO players in the Asia-Pacific (Middle East, South Asia and South-East Asia).
- Reduction in foreign exchange outflow.
- Employment generation.
- Increased revenue and investments.
- Manufacturing of components and spares within the country.
MRO market in India can be primarily categorized into five regions
- Delhi
- Mumbai
- Bangalore
- Chennai
- Kolkata
Challenges to the Aircraft Maintenance Repair Overhaul Industry
- Economic and Infrastructural Barriers
- Competing against already established international players in terms of scale.
- Large initial capital expenditure for facilities, personnel training, components, marketing, etc.
- Apprehension amongst MRO customers towards incurring switching costs.
- Information asymmetry as a consequence of control of information, data and manuals by OEMs/ manufacturers.
- Licensing and Compliance Issues
- Getting FAA/EASA licences as DGCA licenses and regulations have limited recognition in the global markets
- Intense FAA/EASA audits of MRO provider’s documents, processes, stores, AME licensing, stock referring parts issued or fitted in the aircraft, etc., which are lengthy and logistically cumbersome processes.
- Labour Issues
- Brain drain – Fewer availability of jobs within the country composes skilled personnel to seek jobs outside the country.
- Lack of training infrastructure for human capital development.
National Civil Aviation Policy 2016
- To enable 300 million domestic ticketing by 2022 and 500 million by 2027 along with international ticketing to the tune of 200 million by 2027.
- MRO service companies are to be exempt from airport royalty and extra costs for five years.
- MROs no longer expected to provide proof of their client’s demand for parts or orders.
- Extension of duty-free component imports for MRO from one to three years.
- Provision for airlines to claim a set-off on the 5% GST of MRO performed outside India.
- Permission for foreign aircraft to visit India for MRO for a six-month term instead of the erstwhile 15-day time period.
NITI GearShift Challenge
Source: News On Year
GS III: Indian Economy and issues relating to planning, mobilization of resources, growth, development and employment
Overview
- News in Brief
- About NITI GearShift Challenge
- About e-FAST India Initiative
Why in the News?
NITI Aayog has announced the launch of the ‘NITI GearShift Challenge’ as part of the e-FAST India initiative.
News in Brief
- This pioneering hackathon aims to foster innovative business models for the adoption of zero-emission trucks in India.
- Addressing the nation’s pressing economic and environmental challenges.
About NITI GearShift Challenge
- NITI Aayog has also invited students, transport service practitioners, academics, and researchers to develop innovative business models that address financial, technical, and operational challenges in the adoption of electric trucks.
- The program has garnered participation from e-FAST India knowledge partners, financial institutions, and industry forums.
- The ‘NITI GearShift Challenge’ is being organised in collaboration with IIM Bangalore, Smart Freight Centre India, WRI India and other institutions.
- NITI Aayog said that the hackathon will unfold in two rounds.
- It said that the GearShift Challenge marks a pivotal move towards sustainable freight transportation in India.
About e-FAST India Initiative
- In order for India to meet its 2070 net zero obligations, it became imperative to decarbonize road-based freight transportation, which gave rise to e-FAST.
- 2022 saw its introduction in September.
- Its goal is to accelerate the shift to more environmentally friendly and cleaner freight transportation.
- The platform enables proactive national and international cooperation, provides scalable ideation and pilot program development help, and investigates technology integration and related research.
- It is a forum that encourages discussion, cooperation, and deliberation amongst various stakeholders, including the government, OEMs, shippers, logistics service providers, and industry experts, in order to promote the large-scale development and implementation of electric technology in the freight industry.
- The joint efforts of twelve expert partners support it.
Daily Current Affairs: Click Here