Budget 2026: What are the major announcements for aviation sector

Finance Minister Nirmala Sitharaman on Sunday proposed customs duty exemptions on key aviation components and raw materials to boost domestic manufacturing and maintenance capabilities in the civil and defence aviation sectors.

In her Budget 2026-27 speech, Sitharaman said basic customs duty will be exempted on components and parts required for the manufacture of civilian, training and other aircraft.

“I propose to exempt basic customs duty on components and parts required for the manufacture of civilian, training and other aircrafts,” she said.

She also proposed exemption from basic customs duty on raw materials imported for manufacturing aircraft parts used for maintenance, repair and overhaul (MRO) requirements by defence sector units.

The proposals come amid steady growth in India’s aviation sector, rising demand for air travel and rapid infrastructure expansion, as highlighted in the Economic Survey tabled in Parliament on January 29.

India has emerged as the world’s third-largest domestic aviation market, as per the Economic Survey. The number of airports increased to 164 in 2025 over a decade, compared to 74 in 2014, showing rapid infrastructure growth in the country.

In FY25, Indian airports handled 412 million passengers, and the same is expected to rise to 665 million by FY31. On the other hand, air cargo volume grew from 2.53 million metric tonnes (MMT) in FY15 to 3.72 MMT in FY25, driven by several key policy initiatives and reforms, as per the Economic Survey. The air cargo volume stood at 2.95 MMT in FY26 (until December 2025).

In Budget 2025, the government also focused on strengthening air connectivity and infrastructure. Under the UDAN scheme, the government launched 619 routes, connecting 88 airports. The government also announced a revamped UDAN programme to add 120 new destinations, with support for helipads and small airports in remote and hilly regions, including the North East.

India’s annual air passenger traffic crossed 350 million, making it the third-largest aviation market in the world. Over the past decade, domestic air travel grew by 10-12% annually and the number of airports rose to 159. The government said it would develop 50 more airports by 2030.

Budget 2025 also proposed greenfield airports in Bihar, along with the expansion of Patna airport and a brownfield airport in Bihta.