India May Grant Infrastructure Status to Aircraft in FY27 Budget

India is considering granting infrastructure status to aircraft in the Union Budget for the 2026–27 financial year, a move that could significantly ease airline financing and support long-term growth in the country’s aviation sector. Unnamed industry sources cited by The Hindu Business Line said the proposal is gaining traction within government circles as policymakers look to lower capital costs for airlines and improve access to domestic funding.

If approved, the classification would allow aircraft to qualify for lower-interest loans under the Reserve Bank of India’s Priority Sector Lending framework. This could expand the pool of eligible lenders beyond traditional banks, potentially benefiting start-up carriers and smaller operators that often struggle to secure competitive financing for fleet expansion.

India’s airlines are in the midst of an unprecedented fleet growth cycle. According to ch-aviation fleet data, five Indian carriers collectively have 1,741 aircraft on order. However, smaller and newer airlines face structural challenges when acquiring aircraft, particularly through operating lease arrangements that expose them to foreign exchange risk and higher long-term costs.

Sources said earlier efforts to secure infrastructure status for aircraft were met with resistance, largely because aircraft are considered movable assets rather than fixed infrastructure. That stance may now be softening following the government’s decision to extend infrastructure classification to commercial shipping vessels, setting a precedent that could be applied to aviation assets.

Industry executives argue that infrastructure status could have several knock-on benefits. These include encouraging a gradual shift from operating leases to finance leases, reducing foreign currency outflows by enabling rupee-denominated borrowing, and allowing participation from long-term domestic investors such as insurance companies and pension funds. Such changes could help anchor aircraft financing more firmly within India’s financial system.

There is also discussion around safeguards to ensure regulatory clarity. Proposed guidelines could require aircraft financed under the framework to be Indian-owned and registered domestically, strengthening jurisdictional certainty and improving repossession and enforcement mechanisms in the event of default. These measures are seen as essential to reassuring lenders and reducing risk premiums.

Some industry stakeholders have suggested broadening the scope of the policy beyond commercial airlines. Proposals include extending infrastructure status to twin-engine helicopters used in offshore mining and exploration, as well as business jets, under a unified financing framework rather than limiting eligibility to government-backed special-purpose vehicles.

Fleet data underscore the scale of India’s aviation ambitions. IndiGo has 905 aircraft on order, Air India is awaiting delivery of 511 aircraft, Akasa Air has ordered 195, SpiceJet expects 129, and regional carrier flybig has one aircraft on order.

Industry observers say infrastructure classification could become a pivotal policy lever, shaping how India finances and sustains one of the world’s fastest-growing aviation markets.

Related News: https://airguide.info/category/air-travel-business/airline-finance/

Sources: AirGuide Business airguide.info, bing.com, ch-aviation.com