The Indian aviation sector is the third largest in the world in handling domestic traffic. As one of the fastest growing economies with a large middle class population, India is poised to record double digit growth in the aviation sector. In this post, Compliance Calendar traces the process of registering a subsidiary company in the civil aviation industry in India.

1. An ever-increasing demand: Half of India’s population is below 35 years. As the largest such population in the world with a young and affluent demography, India offers an ever increasing opportunity for expansion in the aviation space.

2. Growing MRO sector (Maintenance, Repair, Operations): As a well-connected country with a large number of domestic and international flights, India offers a diverse opportunity to maintenance and operations companies in the aviation sector. The MRO industry is likely to grow to $2.4 billion by 2028.

3. Great scope for non-scheduled air transport services: With a large vibrant e-commerce industry, India offers a host of opportunities to players in air cargo, transportation and delivery services.

4. Airports and connectivity reforms: India is spreading its wings with progressive policy reforms in the aviation sector such as - Ude Desh Ka Aam Nagrik (making flying accessible for the common man), PPP in airport construction and maintenance, leading to a 58.5% year on year increase in domestic passenger traffic and a 118% year-on-year increase in international passenger traffic.

5. Third largest aviation market by 2024: By several estimates, India is set to become the world’s third largest aviation market in the year 2024, overtaking the UK. Our airport capacity is expected to handle 1 billion trips annually by the end of 2023.

» 100% FDI : The government of India has allowed 100% FDI in scheduled air transport services, regional air transport and domestic scheduled passenger airlines. This includes investment upto 49% in the automatic route and Government route if the investment exceeds 49%.

» Expansion in airports: With expansion in the number of airports from 74, in 2013-14 to over 137 airports now, there is a substantial increase in passenger traffic, operational requirements and public private partnerships in the civil aviation segment.

» In 2022, Mumbai International Airport Ltd (MIAL) raised US$ 750 million in debt in a private placement from a US-based private asset manager, Apollo Global.

» Adani Airport Holdings (AAHL) raised US$ 250 million in May 2022 for capital expenditure and for the development of six airports that it currently manages.

» Airports are being developed in the PPP model, such as Navi Mumbai and Mopa (Goa)

a. The first step for entering the Indian market is to incorporate a subsidiary company in India. The regulating law for companies in India is the Companies Act, 2013 and its associated rules.

b. You need to register the company with the Registrar of Companies (ROC) under the Companies Act, 2013. Compliance Calendar has assisted thousands of companies in niche industries in filing for incorporation successfully.

c. The process requires obtaining a Digital Signature Certificate (DSC) and Director Identification Number (DIN) for the proposed directors. There must be at least one Resident Indian director on the board.

d. The draft of the company's Memorandum of Association (MOA) - enlisting specifics of the aviation business that the company plans to engage in, and Articles of Association (AOA) regulating the internal procedures, alongside necessary forms (that includes name, registered address, capital limits etc) has to be filed with the Registrar of Companies.

e. An Advanced Reporting Form needs to be filed with the RBI, when share capital is subscribed to, by foreign entities. Filing of Form FC-GPR with RBI must be done within 30 days from date of allotment of shares to subscribers/foreign holding company.

» Key Regulators : In India, the aviation industry is regulated by the DGCA (Directorate General of Civil Aviation), the Bureau of Civil Aviation Security, Airports Authority of India and the Airports Economic Regulatory Authority of India.

» Approval from Directorate General of Civil Aviation (DGCA) - Depending on the nature of the aviation activities, a company may need to obtain specific approvals and licences from the DGCA. These may include Air Operator Permit (AOP), Non-Scheduled Operator Permit (NSOP), Maintenance Repair Overhaul (MRO) approvals, or other licences.

» Air Operator Permit: This permit is a necessary requirement under the International Civil Aviation Organisation’s due diligence norms. It is granted for both Scheduled and non-scheduled transport and cargo services.

Airlines operating with aircraft with take-off mass equal to or exceeding 40,000 kilograms (kg) and operating with up to five aircraft: INR 500 million. For each addition of up to five aircraft, an additional equity investment of INR 200 million will be required.

Airlines operating with aircraft with take-off mass not exceeding 40,000 kg and operating up to five aircraft: INR 200 million. For each addition of up to five aircraft, additional equity investment of INR 100 million will be required.

There may be no need for further enhancement of equity if the paid-up equity/reserves of INR 1 billion are available with the airline.

» Financial Requirements to meet before applying for an Air Operator Permits - For Non Scheduled Air Transport Permit:

Airlines operating up to two aircraft or helicopters: INR 20 million.

Airlines operating with between three and five aircraft or helicopters: INR 50 million.

Airlines operating with between six and 10 aircraft or helicopters: INR 100 million.

Airlines operating with more than 10 aircraft or helicopters: INR 150 million.

» Security Clearance: All directors, shareholders, and key personnel of the subsidiary company must undergo a security clearance process. This involves submitting personal information, background checks, and obtaining security clearances from the relevant authorities such as the Ministry of Home Affairs and the Bureau of Civil Aviation Security (BCAS).

Insurance requirements to fulfil for an airlines operator:

» The operator must maintain comprehensive insurance to cover its liability towards passengers and their baggage, crew, cargo, hull loss and third-party risks in compliance with the Carriage by Air Act 1972 and other applicable laws.

» The eGCA portal was launched in the year 2021, as a significant single window platform that aggregates regulatory requirements for the aviation sector at one place, in pursuit of ‘ease of doing business’ goal.

» Various permissions for aircraft owners such as code-sharing between airlines, Grant of Operating Authorisation, aerodrome and heliport registration process have been integrated.

» The other recent features also include automatic integration of pilot log books with the eGCA software, landing requests data sharing between district authorities, medical sorties, state governments etc.

» Process related to issuance of Certificate of Airworthiness (C of A) & Airworthiness Review Certificate (ARC) has been enhanced, wherein operators are now issued C of A/ ARC at foreign delivery locations through the e-GCA portal for ferrying the aircraft to India.

Aircraft Acquisition and Registration

If your subsidiary company intends to operate aircraft, you will need to acquire or lease the aircraft and register them with the DGCA. This involves compliance with the Aircraft Rules and obtaining a Certificate of Registration (CoR) and Certificate of Airworthiness (CoA) for each aircraft.

Compliance under Aviation and other laws

In addition to civil aviation requirements, one needs to ensure compliance with other applicable laws and regulations, such as labour laws, taxation laws, environmental regulations, and any specific regulations related to the operation of airports or airfields.

Sector-specific compliances in India for the civil aviation industry :

The civil aviation industry is a heavily regulated sector, with primary focus on national security and individual safety. Thus, there are several niche compliances based on the specific area of operation and type of business. Here are a few such specific compliance requirements:

1. Unique Identification Number for Drone Operations: Obtaining a Unique Identification Number (UIN) from the Ministry of Civil Aviation (MoCA) is required for most aviation-related activities in India. Every unmanned aircraft system (other than nano drones weighing below 250 grams) must be registered on the DigiSky portal. Requirements for issue of Unique Identification Number are:

a. Citizen of India, or
b. A body Corporate with principal place of business in India, or
c. Substantial ownership or effective control vested in Indian nationals, or
d. Chairman and two-thirds directors are citizens of India
e. By a company or corporation registered elsewhere than in India, provided that such company or corporation has leased the Remotely Piloted Aircraft Systems, to any organisation meeting the above requirements.

2. Heliport Operations approvals: The DGCA, through a recent notification in June 2023, has eased the business of helicopter operations by private individuals. Through the applicant’s e-GCA profile, NOC from various departments for heliport licence and operational authorisation can be obtained via the online mode.

3. Online filing of landing requests: The Ministry of Civil Aviation has created a new portal API Heli-Sewa to facilitate operators to file their online helicopter landing requests.

The Goods and Services Tax in India is applicable to lease rentals of aircraft (5% on reverse charge basis to be paid by the lessee); maintenance, repair and overhaul services; and on-air travel. However, the import of aircraft for use by scheduled airlines is exempt from import duty. Additionally, Aviation Turbine Fuel (ATF) is exempt from the GST, and regular central excise tax and VAT applies on it.

It's important to note that the exact process and requirements may vary depending on the specific activities and operations of your subsidiary company. Connect with legal and aviation experts at Compliance Calendar to guide you through the registration and approval process and ensure compliance with all applicable laws and latest regulations in the civil aviation industry.