Govt mulls linking aviation bilaterals with MRO facilities

To bring down costs for domestic carriers, the government is looking at linking bilaterals in the aviation sector to a foreign aircraft maker setting up facilities in India.
Under a bilateral air service agreement, two countries allow their respective carriers to fly into each other's territory.
Such a move would help reduce the expenses incurred by local airlines on Maintenance, Repair and Overhaul (MRO) works, which are done by them mostly overseas as costs are high in India.
"Bilaterals are government to government. We would ask the governments if you want our bilaterals, can you please require your air plane suppliers place some manufacturing facility in our country," Civil Aviation Secretary R N Choubey today said.

About the proposal, he said it is "early days".
"It depends who needs whom more, whether I need their business more or they need my business more and my perception is that they need my business more," Choubey said.

Indian aviation sector has huge potential, especially since there is a significant chunk of population who are yet to fly.
The Indian MRO market, estimated to be worth about USD 700 million, is said to be much costlier than those in Sri Lanka, Dubai, Hong Kong, Singapore and China due to higher taxes.
Explaining the rationale behind the proposal, Choubey said, "suppose any country says that they buy 100 planes and they would like the air plane manufacturer supplier to built a large system in their country. I would say, instead of your country, place it in my country if you want my bilaterals".

"While we are negotiating for the bilaterals, then we may ask that country that in your own country you will get offset for those 100 planes. Give a part of that offsets to us," he added.
Offset clause generally refers to a foreign company investing back a portion of the deal into India.
Choubey noted that offsets have a slightly different meaning with respect to bilaterals.
"When you place a bulk order for supplies, then you require certain facilities to be built in our country... In the context of bilaterals what it would mean is that if there is a country which places orders for 100 planes and I know that a significant part of that 100 planes is because of the business we are providing to it through the bilaterals," he said.