Foreign direct investment restrictions and high tax rates are hampering flow of investment in the civil aviation sector, a study has said.
"Broadly, (major hindrances) are foreign direct investment limitations and the presence of high tax liability especially imports duties for aircraft spares," stated a study conducted by KPMG, on business opportunities in transportation sector in the country.
The study, conducted with an objective of appraising British investors about emerging opportunities in the transportation sector, pointed out that the MRO market in India will grow by at least 10 per cent in near term and the number of commercial aircraft is estimated to increase to 3,100 by 2026.
But, it pointed out the lack of clarity in government policies has made it difficult for foreign companies to start MRO operations in the country. The study was authorised by UK Trade and Investment Commission.
India allows FDI of up to 49 per cent in maintenance, repair and overhaul, domestic air transport services and ground handling services. NRIs are allowed to hold up to 100 per cent equity in domestic air services through automatic route, but foreign airlines are barred from such a facility. The government is working on a new civil aviation policy. The study called for clarity regarding FDI limits in the new policy.