India May Classify Aircraft as Infrastructure in FY27

India’s government is considering a policy shift to classify commercial aircraft as “infrastructure assets” in the upcoming Union Budget for the financial year 2026-27, a move that could reshape financing dynamics for the nation’s aviation industry. Industry sources briefed on the matter say the proposal aims to ease borrowing costs for airlines and support broader sector growth in a market grappling with high capital expenditure and sustained aircraft orders.

Under the proposed infrastructure status, airlines would potentially gain access to lower-interest loans through frameworks such as the Reserve Bank of India’s Priority Sector Lending (PSL) norms, which mandate that certain categories of sectors receive dedicated financing from banks. Industry executives argue that including aircraft in this category would widen the lender pool, particularly benefiting smaller carriers and startups that struggle to secure competitive credit terms under current norms, where aircraft are treated as movable property rather than infrastructure.

India’s commercial aviation market has seen an unprecedented surge in aircraft orders, with carriers collectively holding commitments for more than 1,700 aircraft. According to fleet tracking data, IndiGo has about 905 jets on order, Air India awaits delivery of some 511 aircraft, Akasa Air has around 195 ordered, SpiceJet expects 129 and regional operator flybig has one aircraft on its books.

The infrastructure classification mirrors a recent extension of similar status to commercial shipping vessels, which industry advocates cite as a precedent that strengthened financing access for shipowners. The proposal, according to sources, could encourage a shift away from operating leases — traditionally the dominant mode of aircraft acquisition — toward finance leases backed by rupee-denominated loans. This would reduce foreign exchange exposure tied to dollar-denominated leases and potentially lower fleet acquisition costs.

Beyond airlines, executives have suggested including other high-value aviation assets such as twin-engine helicopters used in offshore and exploration operations, and business jets, under a broader financing framework. Some stakeholders argue for a universal approach that harmonises aircraft financing with national infrastructure priorities, though specifics of who would qualify and how such an asset pool would be regulated remain under discussion.

Critics of the proposal have previously raised concerns about treating movable aircraft as infrastructure, a designation typically reserved for fixed assets like airports, roads and power systems. However, proponents contend that given the strategic role of aircraft in India’s connectivity and economic expansion, coupled with massive fleet growth projections, tailored financing mechanisms are needed to support sustained network development.

For Indian carriers, access to lower-cost, longer-tenor financing could have tangible implications for route planning, fleet strategy and competitiveness. Historic challenges in securing domestic capital for aircraft acquisition have often pushed carriers toward reliance on international lessors or short-term borrowing, with associated foreign exchange risks and higher overall costs. Infrastructure classification may mitigate these pressures at a time when airlines are scaling both domestic and international operations.

The consideration of aircraft as infrastructure also aligns with broader efforts to integrate the aviation sector more deeply into national infrastructure planning. As airport capacity expansion, aircraft orders and network ambitions grow, policymakers and industry stakeholders are seeking mechanisms that can underwrite this growth with robust domestic financing channels.

While the classification is not yet official, industry watchers expect the Union Budget announcement to shed light on whether the measure will be included, and if so, how regulators will structure eligibility and compliance guidelines. Given expanding debt loads, fluctuating passenger demand and capital intensity of aircraft acquisition, any change in financing rules could resonate widely across India’s airline operations and fleet deployment strategies in years to come.