France's Safran shortlists Jewar, Nagpur, Hyderabad for MRO unit

Aerospace component major is in talks with state governments for better terms, including lower taxes, before deciding on place

French aircraft engine manufacturer Safran S.A. has shortlisted Jewar, Nagpur, and Hyderabad for a new aircraft engine maintenance, repair and overhaul (MRO) unit in India to cater to its airline customers. The investment for the total project is around $150 million.

The aerospace component major is in talks with state governments for better terms, including lower taxes, before deciding on the place, said people in the know.

The company didn’t respond to queries till the time of going to press

Safran and GE Aviation own 50 per cent stake each in US-based CFM International, which manufactures engines for the Airbus A320 and Boeing 737 aircraft. Currently, 220 Airbus and Boeing planes in India are fitted with CFM engines. Additionally, there are 485 planes on order from IndiGo, SpiceJet, and Vistara which will be equipped with these engines and are expected to be delivered over the next five years. 

In its latest order win from Indian airlines, Rakesh Jhunjhunwala-backed Akasa Air last month announced a deal — that is estimated to be worth $4.5 billion — to purchase CFM LEAP-1B engines to power its 72 Boeing 737 MAX aircraft.

The unit will also be a big boost for airports. Being close to Delhi, Jewar has an edge over others, as it is the home base for CFM’s major customers like IndiGo, Vistara, and SpiceJet. Moreover, incentives from the Uttar Pradesh (UP) government could also tilt the choice in favour of Jewar, which will have the Noida International Airport ready by 2024. The airport is 72 kilometres away from Delhi Airport.

Two other shortlisted airports in Nagpur and Hyderabad are owned by GMR Group.

“The company will soon zero in on the location for the engine unit. It is eager to start the plant soon. It now has a clear upper hand in the Indian civil aviation market, where most Indian aircraft in the near future will be fixed with CFM engines,” said a person involved in the process.

The Government of UP is in talks with international MRO companies for setting up MRO facilities in the state. The companies have been asking for incentives, such as a relaxation in the goods and services tax (GST), state investment, and export promotion, said Minister of Micro, Small and Medium Enterprises Sidharth Nath Singh.

To give a fillip to India’s MRO industry, the GST Council last year reduced taxation on domestic MRO services to 5 per cent, from 18 per cent.

Currently, only Air India has the wherewithal for in-house maintenance of aircraft engines. Other carriers send their engines overseas for overhaul and major repairs. A domestic MRO will help Indian airlines reduce costs and save on foreign exchange, besides generating employment for engineers and technicians. Since domestic MRO companies don’t overhaul engines, Indian airlines send their aircraft to Sri Lanka, Dubai or Singapore for major work.

In September, the Ministry of Civil Aviation announced a new policy for MRO services that includes leasing of land through open tenders and abolishing royalty charged by the Airports Authority of India.

Besides, land allotment for entities setting up MRO facilities will be done for 30 years, instead of the current short-term period of three to five years.