NEW DELHI — The Indian Air Force (IAF) has been hit by customs duties on aircraft engines and related spare parts leading to one MiG 29-K aircraft being stranded at Goa naval air base and spare engines and related equipment stranded at various other airports due to nonpayment of customs duty, said an IAF official in private.
Spare engines and related equipment have also been stranded at various other airports for nonpayment of customs duties, the official said.
IAF was caught unaware by the new requirement to pay customs duties on some defense goods, which began April 1, but arrangements are being made to find funds to get the spares and equipment released in the near future, the IAF official said.
Finance Minister Arun Jaitley in his 2016-17 budget allocations lifted blanket customs duty exemptions on several defense goods, including aircraft engines and related parts.
The move requiring to lift blanket customs duty whichmeans payment of customs duties on some imported defense goods is in line with the "Make in India" policy, said an official of the Ministry of Defense (MoD), but it has caught the user [IAF] by surprise.
"In my opinion such wide-ranging policy amendments should have been done through thorough consultation with all stakeholders in MoD," says Sujith Haridas, deputy director general of industry lobby at the Confederation of Indian Industry.
"The broad purpose of this move could be to rationalize the exemptions and limit the same to only certain development projects or capital goods for maintenance repair and operations," Haridas said.
Though intended to boost the domestic industry, the lifting of the blanket customs duty exemption on several defense goods will impede up gradation of military aircraft upgrades at state enterprise Hindustan Aeronautics Limited (HAL) because it will increase the cost of imports and lead to delays at the customs department. HAL is using the engines and spares to upgrade Mirage, Jaguar and MiG aircraft.
However, the MoD official said the change in is intended to intention (of imposing customs duty on defense goods) is not to make upgrades costlier but to try ensure that the parts are made in India, not to get revenue.
Ankur Gupta, a defense analyst with E&Y India who favors the slapping of customs duty, Ankur Gupta, defense analyst with E&Y India says, "HAL and IAF were not focusing on indigenization and instead were using the easier way out of importing spares; this is not in line with the 'Make in India policy.'"
Even as the analysts and officials debate the need for the exemptions lifting blanket exemptions of customs duty on aircraft engine, spares and other defense goods, the IAF official said the move should have been delayed as the domestic industry begins to manufacture these goods because it has otherwise it will only led to increased costs, delays and confusion.
Vivek Raghuvanshi is the India correspondent for Defense News.
