India’s MRO Sector Waiting To Take Off

Good Morning.  India’s growing aviation sector has given wings to the aircraft maintenance, repair and overhaul (MRO) industry. In spite of investments, infrastructure additions and acquisitions, the sector has a long way before it comes close to its competitors in Dubai and Singapore. 

In other news, the Goods and Services Tax (GST) 2.0 regime is all set to land a windfall for car buyers as auto majors announce deep cuts in passenger vehicle prices. Meanwhile, Britannia is betting on higher sales from rural areas, which are performing better than the urban markets.

DECODE THE NEWS

Hurdles Continue To Stall India’s Aviation Repair Industry Growth  

By Neelam Mathews

What? 

India’s aviation sector has been growing exponentially, with airlines planning large fleet expansions. Yet, the needle has barely moved in the case of its maintenance, repair and overhaul (MRO) industry. 

There have been headline-grabbing events like Adani Defence Systems and Technologies’ acquisition of India’s largest private sector MRO company, Air Works. Public sector companies like Air India Engineering Services (AIESL) and Hindustan Aeronautics Ltd (HAL) entered the fray and also partnered with each other to offer low-cost MRO services. 

The sector also has government support as MRO GST has been cut to 5% from 18%. The sector also enjoys 100% foreign direct investment (FDI), customs duty exemptions as well as Production-Linked Incentives (PLI). 

In spite of all the above, the sector has a long way to go before a large number of Indian aviation companies choose them as a viable option. Most companies head to Singapore or Dubai for their MRO needs instead. 

Why? 

Indian MRO players offer a cost advantage. For example, heavy maintenance of a widebody aircraft in India costs $1.2–$1.5 million. In Dubai, the same costs anywhere between $1.6–$2 million. It inches up to $1.8-$2.2 million in Singapore. 

The turnaround time is key for aviation players, and that’s where domestic players lose. Indian players take around 25–40 days for maintenance while Singaporean players wrap it up in 18-28 days. 

Indian players are also unable to offer the technical depth of their foreign counterparts. When it comes to high-value assemblies, like engines and landing gear, most companies head to other countries. Aircraft manufacturers gatekeep their IPs, have a high control on spare parts and more such. 

What Next? 

India also lacks sufficient trained personnel. The country needs as many as 13,000-15,000 personnel by 2030, and barely has half of this staff. Training of the personnel is slow and is not in line with the standards of aircraft manufacturers. 

Hurdles notwithstanding, the focus of the MRO sector is indeed shifting to high-value work.  Aviation companies like Indigo are investing in the same, and companies like GMR Aero Technic are expanding their hangar capacities.

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FUTURE PROOF

‘Pathetically Low’: Accenture’s Ganesan Ramachandran On India’s AI Skill Gap

Artificial intelligence (AI) has made rapid strides in the last few years, evolving from Generative AI to Agentic AI. Companies are leaning into this and constantly assessing where Agentic AI can be integrated to improve processes and automate tasks that require human effort. 

“This is the newest AI trend,” Ganesan Ramachandran, managing director with Accenture Global Capability Network, said he has observed recently. 

The emergence of AI has also thrown up questions and doubts about job losses, as companies begin to automate certain processes. “On the other side, there is a huge opportunity waiting for us to tap into, which is how do we ensure that the availability of skilled manpower is managed to ensure that the demand, which is going to come in the next two to three years, is addressed. And we need to do activities at multiple levels,” Ramachandran said. 

Soon, buying a car could become completely automated. The customer can log on to the website of the manufacturer, type in the model, their location and other relevant information, and AI could help complete the sale. But we aren’t quite there, yet. 

While this sounds easy, it involves layers of skills to orchestrate it correctly so that the AI completes the task without glitches, and ethically. 

Are India’s engineers ready and upskilled to manage this? “​​I believe only 5% of engineers from Tier 1, Tier 2 are ready to deploy AI resources. That is pathetically low,” Ramachandran said and added, “Most of the MBA institutes have it (technology) as an elective, not as a compulsory course. So, when you are not understanding, when you understand business very well, you understand technology at a high level, then you are not able to marry both and bring the best of both worlds for a specific purpose.” 

How can engineering and B-school programmes fill this gap? 

Listen to the entire conversation here.

Brought to you in partnership with Accenture In India.

CORE NUMBER

Rs 1.06 lakh crore 

This is how much market cap seven of India’s top ten listed companies gained last week. This uptick was a result of the bullish trend in the equity markets. Benchmark indices Sensex and Nifty gained 1.1% and 1.3% respectively during the week. Bajaj Finance and Reliance Industries were among the biggest gainers. 

This is how much value the companies added last week: 

Not all companies gained from the momentum in the broad markets. Tech majors TCS and  Infosys, along with Hindustan Unilever, saw their value erode during the week. 

FROM THE PERIPHERY

Incident Rate ‘Normal’ In Lieu Of Scale, Says Air India

Reacting to the rising number of passenger complaints, Air India chief Wilson Campbell said that the rate of incidents is normal, given its scale and size. He said that Air India group has over 1,200 departures every day, nearly one every minute, and in that context, the number of incidents is ‘entirely normal’. 

Origin: Air India passengers have been complaining about service issues, flight cancellations and delays due to technical snags. Campbell said that they’re transparent in reporting incidents and events. He also added that the crew has been empowered to offer e-vouchers in cases of service shortfall like mishandled baggage. 

Context: Air India has been under the spotlight after its Boeing 787 Dreamliner crashed in June, killing 260 people. It has been recalibrating its operations since then and working to build trust, brand value and staying focused, added Campbell.

Tata Motors, Hyundai, M&M Slash Prices

Top auto companies Tata Motors, Hyundai and Mahindra and Mahindra (M&M) said that they will pass on the GST cut benefits to customers. As per the new GST regime announced last week, small cars will be taxed at 18%, while bigger cars will attract 40%. 

By The Numbers: After the GST cut, the prices of Tata Motors cars will come down anywhere between Rs 30,000 to Rs 4.65 lakh. Hyundai car prices would come down by Rs 60,000 to Rs 2.40 lakh. M&M too said it will pass on the full benefit of Rs 1.56 lakh to its consumers, under the new GST regime 

The Turning Point: As per the new GST regime, cars up to 4 meters in length will attract a GST of 18%, as opposed to 28% earlier. The maximum benefits can be reaped by models like Tata Punch, a number of models by Maruti Suzuki like Alto K10, Swift; as well as Hyundai’s Grand i10 and more. The new tax rates will be applicable from September 22, 2025, onwards.

Britannia To Go Big On Rural

Britannia’s CEO Varun Berry expects rural markets to contribute to as much as half of its total sales in the next three to four years. The maker of Good Day biscuits reported double-digit growth in its rural sales in Q1 of FY25, while its urban markets saw ‘high single-digit’ growth. 

The Shift: Britannia has always been an urban-centric company, but its rural markets have been growing faster of late. Historically, the urban to rural sales split has been 70:30. As of Q1, it clocked 40% of its sales from rural markets. 

Next Steps: The ‘aspirational’ rural markets hold potential for consumption and distribution, Berry said. It aims to establish its own distribution into rural markets so that they do not have to depend on wholesalers. Britannia directly reaches three million retail outlets across rural and urban areas. It aims to strengthen it by around one lakh outlets every year.

CBIC To Address Complaints On GST Benefits

The Central Board of Indirect Taxes and Customs (CBIC) will address complaints, if any, on non-reduction of price of goods after the new GST regime comes into effect. Speaking after the Council decision, CBIC chief Sanjay Kumar Agarwal said that the industry had earlier passed on the benefits of tax cuts to consumers, and expressed confidence that they will, this time around as well. 

Setup: The tax system has an anti-profiteering mechanism, and the law stipulates that the benefits of the cuts must be passed on to consumers. Rate cuts were taken up in 2017, 2018 and 2019 too, and not many complaints were filed on this aspect. Only 704 such cases have been registered with the authority, said Agarwal. 

Backstory: Last week, the GST Council cut tax rates on 375 items and did away with two slabs of 12% and 28%. Come September 22, most commonly used goods will attract a 5% GST and 18% on others. This is the biggest rejig in the indirect tax rates in the last eight years since it came into effect.

PODCASTS

Markets Are Losing Steam but Other Assets Are Volatile

On Episode 671 of The Core Report, financial journalist Govindraj Ethiraj talks to Nikhil Varma, Technical Lead, India at Algorand, Sheetal Sapale, Vice President–Commercial at Pharmarack as well as Ganesan Ramachandran, Managing Director and Lead - Industry Groups at Accenture.

• Markets are losing steam but other assets are volatile.

• What the GST rate cut on life saving drugs really means.

• India’s new digital personal data protection bill can trigger key changes in handling of data and need for security.

• Agentic AI is a big opportunity. What do employers want from the future workforce?

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✍️ Zinal Dedhia, Kudrat Wadhwa | ✂️ Rohini Chatterji | 🎧 Joshua Thomas

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