Centre Forms High-Level Committee to De-Risk Aircraft Leasing and Financing in India

NEW DELHI — The central government has initiated a comprehensive review of India's aircraft leasing and financing framework to reduce risks for international lessors and financiers. The move comes as Indian carriers prepare to induct more than 2,000 aircraft over the next decade, presenting a massive capital requirement for the aviation sector.

A high-level committee has been constituted by the Ministry of Civil Aviation (MoCA) to assess existing financing and leasing arrangements between foreign entities and domestic airline operators. The committee's mandate includes examining regulatory and procedural issues related to direct and indirect taxation, duties, and import and re-export provisions. The objective is to enhance India's overall attractiveness as a destination for aircraft leasing and financing.

Among its core focus areas, the panel is examining the feasibility of enabling bankruptcy-remote financing structures within the Indian legal framework. Such structures are designed to ring-fence cash flows for lenders and facilitate the effective enforcement of security interests. In practice, this would provide greater protection to lenders and lessors if an airline encounters financial distress, thereby lowering the risk profile of aircraft financing in the country.

Furthermore, the committee is reviewing the implementation of the Protection of Interests in Aircraft Objects Act. This legislation was introduced by MoCA as a key reform to align India's legal framework with the Cape Town Convention. The panel will recommend measures to address any gaps or challenges arising from the practical application of the law.

Another key aspect of the exercise involves exploring alternative financing mechanisms at GIFT IFSC. The committee is assessing the possible establishment of dedicated funds or infrastructure financing frameworks for aircraft leasing. It is also evaluating enabling conditions, including the potential inclusion of aircraft in the Harmonised Master List of Infrastructure, as the government works to strengthen GIFT IFSC as a global hub for aviation finance.

The current policy review also addresses broader regulatory practices across existing civil aviation laws to enable domestic entities to better leverage opportunities in the leasing market. Recent government data indicates that Indian carriers have outstanding deliveries of 1,640 aircraft, with the country's commercial fleet projected to reach over 2,250 aircraft by 2035.

"The government's proactive steps to de-risk aircraft leasing and introduce bankruptcy-remote financing structures are crucial for the long-term stability of India's aviation sector. As domestic carriers look to induct thousands of new aircraft over the next decade, lowering financing costs and aligning domestic regulations with international standards like the Cape Town Convention will build greater confidence among global lessors and financial institutions." — Dr. Shishir Gupta, Founder & CEO, StartupLanes