Budget 2026: Aviation policy shifts focus to manufacturing, MRO and connectivity |
From incentives for indigenisation of seaplane manufacturing to customs duty exemptions, the Union Budget for 2026-27 aimed at lowering costs for the aviation sector, strengthening domestic manufacturing, and expanding regional and last-mile connectivity as the government linked aviation growth with tourism, logistics and job creation.
In her Budget speech, Finance Minister Nirmala Sitharaman announced the removal of basic customs duty on components and parts required for manufacturing certain aircraft. “I propose to exempt basic customs duty on components and parts required for the manufacture of civilian, training and other aircrafts,” the finance minister said.
She also announced duty relief for defence-related maintenance. “It is proposed to exempt basic customs duty on raw materials imported for manufacture of parts of aircraft to be used in maintenance, repair, or overhaul [MRO] requirements by units in the defence sector,” Sitharaman said.
The duty exemptions are aimed at reducing input costs for aircraft manufacturing and maintenance, areas that currently depend heavily on imports. India sends a large share of maintenance, repair and overhaul work overseas, adding to operating costs for airlines. The exemptions are intended to improve the economics of carrying out this work domestically and support the growth of local suppliers and MRO facilities.
Ashish Chhawchharia, partner and aviation industry leader, Grant Thornton Bharat, said the duty exemptions would “lower input costs, making aircraft acquisition and upkeep more affordable while strengthening India’s domestic MRO capability”.
He added that with passenger traffic projected to reach 665 million annually by FY31, cost efficiency and local capacity are critical. “The........