Aviation Gets Infrastructure Tag Boost?

The upcoming Union Budget for the financial year 2026-27 is reportedly considering granting infrastructure status to aircraft as an asset category. This potential move aims to stimulate growth within India's aviation sector by easing aircraft acquisition financing for airlines. With over 1,700 aircraft on order by major Indian carriers, smaller operators are particularly struggling with leasing and outright purchase challenges due to high interest rates and domestic banking sector hesitations.

Granting aircraft infrastructure status would allow airlines to leverage the Priority Sector Lending (PSL) framework, regulated by the Reserve Bank of India. This could enable them to secure loans for aircraft acquisition at reduced interest rates. The previous Union Budget's decision to accord infrastructure status to commercial shipping vessels has paved the way for similar consideration for movable assets like aircraft, signaling a positive shift in policy perception.

The government is keen on improving credit access for airlines, especially those operating smaller aircraft, which could encourage greater exposure from banks and support start-up airlines. Industry insiders suggest including guidelines for Indian-owned aircraft on the regulator's registry. This classification could facilitate a shift from operating to finance leases, offering longer repayment tenures and potentially reducing foreign exchange outflows through rupee-denominated loans.