High GST on aircraft components forcing P&W to go abroad for maintenance

High GST rate on aircraft engine components has been forcing Pratt & Whitney to go abroad for engine maintenance despite having a collaboration with Air India's engineering subsidiary AIESL for the servicing, according to an industry source.

Engine components attract as higher as 18 per cent goods and service tax (GST), which makes the business unviable in India, and the engine maker wants the government to bring it in parity with 5 per cent GST as in the case of aircraft components, the source said.

In February, Pratt & Whitney (P&W), which has supplied its Geared Turbo Fan (GTF) engines in large numbers to IndiGo and GoAir for their Airbus A320neo family planes, inked a pact with Air India Engineering Services Ltd (AIESL) to service these engines at the latter's MRO facility in Mumbai.

A P&W spokesperson in a statement to PTI, however, said that collaboration with AIESL remains strong, despite the challenges faced by the industry due to the coronavirus pandemic.

"We continue to work with them to progress our MRO (maintenance, repair and overhaul) partnership," the spokesperson said.

P&W in a statement said that for Pratt & Whitney, encouraging the establishment of an aircraft engine MRO in India offers many benefits. It brings the company's engine support in proximity to its customers in the region; it supports the government's vision of developing India as a major regional MRO hub; and it also makes business sense for the company to leverage India's skills, it added.

"For these reasons, in 2020, we expanded our global network of MRO providers for the Pratt & Whitney GTF engine to include AIESL in India," it stated.

The source, however, said the engine maker has written to the civil aviation ministry, seeking a lower GST rate on the engine components but it has not received any assurance on this issue.

"The project has failed to attract business even after nine months of Pratt & Whitney announcing that AIESL will service PW1100G-JM engines at its facility in Mumbai, owing to GST issue," said the source.

Currently, the GST on the engine components is 18 per cent, higher as compared to the GST rate on aircraft components, which is 5 per cent. "The P&W is seeking to bring it to 5 per cent to make the engine MRO business viable. Despite high labour and transportation costs, it is finding engine maintenance abroad still cheaper compared to India," the source added.

With AIESL performing maintenance on its high-tech GTF engines, P&W is excited to strengthen its global MRO capacity and capabilities for customers on the ground in India, said Joe Sylvestro, vice-president (aftermarket operations) of Pratt & Whitney. He said this at the time of announcing the partnership in February.

The partnership with AIESL will take place in a phased manner, starting with engine upgrade and module exchange capabilities as immediate support of the GTF fleet in India, the company had said.

P&W already has a tie-up with AIESL for maintenance of its 4,056 engine models. These engines power Boeing 747-series aircraft.