Ecommerce policy may not stop discounting by e-tailers: India Ratings
The recently introduced e-commerce policy is unlikely to change the discounting model of online retailers in the near-term, says India Ratings and Research (Ind-Ra). According to the ratings agency, further clarity is essential for the successful regulation of the sector, implementation of the policy and achieving the desired objective to bring about a level playing field between offline and online retailers. Ind-Ra also said the traditional offline retailers are unlikely to benefit as the policy is directed towards defining and limiting the scope of operations of e-commerce business. The policy aims to define and ring fence the marketplace operation activity of e-commerce players (e-tailers) and to distinguish the scope of marketplace and inventory based model as the Foreign Direct Investment (FDI) allowed for both the models is different, the report said. The new guideline prohibits marketplace e-tailers from ownership of goods, and they can only act as facilitators between buyers and sellers and not influence the selling price of the goods. This has been done “to discourage the deep discounting strategy adopted by e-tailers”, but in the absence of additional clarity on policy, adherence for the same will remain a challenge, Ind-Ra said. The e-tailers can continue to exploit the loopholes or adopt innovative strategies to extend deep discounts, till a stringent framework to prohibit and bring a level playing field with offline retailers is put in place, it added. The cap of 25 per cent for an e-tailer’s sale from a single vendor or group company can impact the top-line of the e-commerce firms and those with concentrated vendors will have to undergo significant restructuring of their business model, it said. Amazon Seller Services Private Limited and Flipkart India generate major portion of their sales from joint venture vendors, namely Cloudtail India and WS Retail Services respectively, it added. To mitigate the impact of the same, Ind-Ra believes that e-tailers may adopt multiple vendor strategy which will enable them to have control over pricing. Ind-Ra also said the policy is a step towards safeguarding customer interest by introducing additional disclosures. “With no influence in pricing and no ownership of the product, the e-tailers might go for backward/forward integration and strengthen their presence in the entire value chain including warehousing, shipment and logistics, among others,” Ind-Ra noted. E-tailers may focus extensively on customer convenience by extending value added services, payment flexibility, concessional shipment and delivery, it added.
Air passenger capacity up more than demand in February
Global demand for air travel rose 8.6 per cent in February, building on a 7.1 per cent gain in January, but the amount of seats available rose faster than that for the first time in months, according to the International Air Transport Association (IATA). Capacity measured in available seat kilometres rose 9.6 per cent, outstripping demand and meaning load factor – a measure of how full planes are – dropped 0.7 percentage points to 77.8 per cent, IATA said in its monthly traffic update. Overcapacity can lead to more pressure on prices as well as profits, as currently being seen in the air freight market. “February was the first month since the middle of 2015 in which capacity growth exceeded demand … It is unclear whether this signals the start of a generalized downward trend in load factor, but it bears watching,” IATA Director General Tony Tyler said in a statement.
Adani mulls takeover of SunEdison’s India assets
Adani Group is looking at buying the local assets of US-headquartered SunEdison Inc, two people familiar with the matter told Reuters, after the heavily indebted US solar power developer sought partners for its projects. SunEdison, which a unit said was at “substantial risk” of bankruptcy, has several solar plants in India and last year won an auction to sell solar power in the country at what was then a record-low tariff. The win brought criticism from analysts for aggressive bids despite it needing to strengthen its finances. The auction was part of government efforts to raise solar energy capacity by five times this decade to end chronic power shortages. But troubles for SunEdison at home – facing $12-billion debt and regulatory scrutiny – has cast doubt over its ability to take advantage of India’s biggest push toward renewable energy. Standing to gain from SunEdison’s predicament are companies such as Adani that have solar projects and want to expand. Adani has already told bankers it is interested in SunEdison’s assets, the people said, declining to be identified as they were not authorised to speak publicly on the matter. Adani did not respond to requests for comment. Foreign firms such as SunEdison, compatriot First Solar Inc and China’s Trina Solar Ltd are important for India as the country does not have the know-how or money to develop large-scale solar projects. SunEdison reached a $4-billion (Rs 26,400 crore) agreement last year with Adani to build a factory in India making solar cells and panels, but has since ended the deal. The US company also runs solar plants in India with capacities of about 450 megawatts (Mw). It has another 800 Mw of capacity under development and won a tender for a 500-Mw plant in the southeastern state of Andhra Pradesh. Those assets could also draw interest from Japan’s SoftBank Group Corp and Taiwan’s Foxconn Technology, who have pledged to invest about $20 billion in Indian solar projects with local partners. Pashupathy Gopalan, SunEdison’s Asia-Pacific head, said nearly 500 megawatts of its Indian projects are funded and under construction, and that it was in talks to sign partners. “As a business model, we continue to pursue equity partnerships in our projects to the extent allowed by PPA (power purchase agreements with buyers),” Gopalan said, without elaborating. On Friday, The Wall Street Journal said SunEdison planned to file for bankruptcy protection in coming weeks, citing people familiar with the matter.
Government green-lights Rs 1,622 crore highway project in Karnataka
The government today approved a Rs 1,622-crore highway project in Karnataka under its flagship road-building programme NHDP. “The Cabinet Committee on Economic Affairs, chaired by the Prime Minister Narendra Modi, has given its approval to development of the four-laning of the Hospet-Bellary-Karnataka/Andhra Pradesh border section of National Highway 63 in Karnataka,” a statement from the Road Transport and Highways Ministry said after the cabinet meeting. This work will be under the National Highways Development Project (NHDP) phase-IV, the statement said, adding that the approval is on engineering, procurement and construction (EPC) basis. “The cost is estimated to be Rs 1,621.96 crore, including cost of land acquisition, resettlement and rehabilitation and other pre-construction activities,” the statement said. The total length of the road will be approximately 95.37 kms. The government said about 3,88,728 mandays will be generated locally during the construction period of the highways, in line with the estimates that 4,076 mandays are required for building one kilometre of highways. The main objective of the project is to expedite the improvement of infrastructure in Karnataka and also in reducing the time and cost of travel for traffic, particularly heavy traffic, plying on the Hospet-Bellary-Karnataka/Andhra Pradesh Border sector of NH-63. The main objective of the project is to expedite the improvement of infrastructure in Karnataka and also in reducing the time and cost of travel for traffic, particularly heavy traffic, plying on the Hospet-Bellary-Karnataka/Andhra Pradesh Border sector of NH-63. The development of this stretch will also help in uplifting the socio-economic condition of the regions concerned of the state and also increase employment potential for local labourers for the project activity.
IOC looking at buying stake in Nagarjuna group Cuddalore unit
More than a decade after it declined to take a stake in Nagarjuna Group’s refinery in Tamil Nadu, state-owned Indian Oil Corp (IOC) is looking at buying equity stake in its six million tonnes a year Cuddalore refinery. IOCBSE 0.56 % has held preliminary discussions on a possible equity stake in the project, highly placed sources said. The move follows talks by Singapore-based Netoil to buy a stake in Nagarjuna Oil Corp (NOCL) broke off in February this year. Nagarjuna Oil Refinery Ltd (NORL) holds 46.78 per cent of the equity share capital of Nagarjuna Oil Corporation (NOCL). Tatas too are a shareholder in the refinery. Sources said IOC had in 2002 declined to take a majority stake in the project on the grounds that the country has surplus refining capacity. Also, it had reasoned that the IOC subsidiary Chennai refinery was being expanded and a new 15 million tons a year refinery being set up at Paradip in Odisha to cater to the fuel demand in the southern and eastern India. Chennai refinery has since been expanded to 10.5 million tons and the Paradip refinery commissioned recently.IOC has now begun discussing the equity participation in the project again, they said. Nagarjuna Oil Refinery had in September last year stated that a confimatory due diligence of NOCL was being undertaken by Netoil to acquire the project for Rs 3,600 crore. The six million ton refinery is the first phase of a Rs 25,000 crore project that will have an ultimate capacity of 12 million tons. The project was delayed due to damages caused by a cyclone some years back as well as funding problems due to global economic slowdown later. Around 15 lenders have invested in the project and they have reportedly sought Reserve Bank’s dispensation in view of the assets likely to be classified by RBI as non-performing. The project originally involved relocation of an existing refinery of Mobil, Germany with total refurbishment, revamp, upgradation and modernisation, coupled with addition of several new plants and equipments including captive power plant and captive port terminal. he health check and residual life assessment have been done by RWTUV, Germany and Engineers India Ltd who have certified the residual life of the refinery as more than 20 years, sources said. The project is being implemented by ABB Lummus, who has provided guarantees for completion and performance. Crude supply and export product offtake are provided by Caltex. Domestic product off-take, operation and maintenance, training and other technical advisory services are being sought from IOC, they said.
Centre to provide 1.5 crore gas connections to BPL families
The Centre will provide 1.5 crore gas connections to women members of Below Poverty Line (BPL) families during the current fiscal, Petroleum Minister Dharmendra Pradhan has said. “We will provide 1.5 crore gas connections to women members of BPL families in fiscal 2016-17 and our target is to provide gas connections to five crore women in the next three years,” Pradhan told reporters here last night. “It is a new initiative of our government led by Prime Minister Narendra Modi to provide cooking gas to women members of BPL families with state support,” he said. “After Prime Minister requested people to give up gas subsidy, 96 lakh people have surrendered it and this amount is being used to give LPG connections to women in BPL families,” he added. “The government has set aside a sum of Rs 2,000 crore in Union Budget 2016 to meet the initial cost of providing these LPG connections,” Pradhan said. According to him, the scheme will free women in rural areas from the curse of smoke while cooking and also will reduce the time spent on it. The scheme – ‘Christened Ujjwala’ provides a financial support of Rs 1,600 for each LPG connection to BPL households. The identification of eligible BPL families, as proposed in the Budget for 2016-17, will be made in consultation with the state. Terming the Budget announcement as historic, Pradhan said the scheme will not only have immense health benefits for women and their children by providing a clean cooking fuel but will also provide significant ecological dividends. Quoting World Heath Organisation estimates, Pradhan said, “About 5 lakh women die in the country due to unclean cooking fuels. Most of these premature deaths are due to non- communicable diseases such as heart disease, stroke, chronic obstructive pulmonary disease and lung cancer.” “While providing the new connections to BPL households, priorities would be given to the uncovered states and pockets, particularly in the eastern region of the country. “This will benefit about 1.50 crore lakh households below the poverty line in 2016-17,” Pradhan added.
Government gives nod to National Hydrology Project
Looking to provide real-time flood forecasts as well as data to help farmers plan their cropping pattern, the government today gave its nod to the multi- purpose National Hydrology Project (NHP) which has an outlay of over Rs 3,679 crore. The decision to approve the project — which also intends to facilitate water resource management and ensure equitable use of water — was taken during a Union Cabinet meeting chaired by Prime Minister Narendra Modi. Termed as a programme that is expected to boost India’s prestige in the field of scientific endeavour, the project with a total outlay of Rs 3,679.7 crore aims to cover the entire country as opposed to the earlier hydrology projects which covered only 13 states. “The project will help in the development of real-time flood forecasting and reservoir operations in a manner that does not result in sudden opening of gates leading to the inundation of the areas below,” said an official statement. “It will help in providing real-time information on a dynamic basis to farmers about the groundwater position for them to accordingly plan their cropping pattern,” it added. According to the government, NHP will facilitate integrated water resource management by adopting river basin approach through collation and management of hydro- meteorological data. It will also help in water resource assessment and prioritise its allocation and use for irrigation, the statement said. The project is expected to assist in promoting “efficient and equitable” use of water, especially groundwater, at the village-level and provide information on quality of water, it said. NHP will help in the gathering of hydro-meteorological data which will be stored and analysed on a real-time basis and can be seamlessly accessed by any user at the state/ district/village-level, the statement added. Of the total outlay, Rs 3,640 crore has been earmarked for NHP while Rs 39.7 crore has been kept aside for National Water Informatics Centre (NWIC). To be set up as an independent organisation, NWIC will be under the control of the Union Water Resources Ministry. Fifty per cent of the total project amount, that is Rs 1,839.8 crore, would be loaned from World Bank while the remaining amount would be central assistance from budgetary support.
Indian Oil Corporation to spend Rs 20,000 crore in expansion of its Gujarat refinery
Union Minister Dharmendra Pradhan today said PSU major Indian Oil Corporation was going to spend Rs 20,000 crore for brownfield expansion of its refinery near here. “IOC’s Gujarat Refinery here has been asked to jump directly from BS IV to the more stringent BS VI norms for petrol and diesel, so that cleaner transport fuels become available sooner to bring down vehicular emissions,” the Union Minister of State for Petroleum and Natural Gas said after visiting the refinery. He told PTI that the Gujarat Refinery was expanding capacity to 18 million tonnes per annum (MTPA) from the existing 13.7 MTPA. The expansion is expected to be commissioned in 2020. “After the expansion, it will become the refinery with largest capacity for the company,” the Union Minister said. Pradhan also said he would be visiting Iran on April 9, and was looking to expand energy ties with that country. The agenda of the visit includes ONGC’s participation in developing the Farzad-b gas field, buying additional crude oil and settling pending payments for earlier oil purchased from Iran, he said. “I will also discuss projects including petrochemicals and fertiliser plants in the special economic zone at Chabahar port in Iran,” he said. External Affairs Minister Sushma Swaraj will visit Iran later this month, he said. With changes in the geopolitical situation, India is in a better position to source natural gas and LPG from Iran and oil and gas from Russia, he said. “Post-sanctions Iran provides a huge opportunity for India for sourcing natural gas which would increase the availability of CNG and cooking gas in the country,” he added.
Uber vs Ola: Who will end up dominating the streets?
On March 23, taxi hailing company Uber dragged rival service Ola to the Delhi High Court on charges of ‘false bookings’. Uber claimed that Ola created 93,000 false accounts to book its cabs and then cancelled all, resulting in loss of business and 23,000 drivers abandoning its platform. Ola had denied any wrongdoing. According to Ola, India’s third most valued startup after Flipkart and Snapdeal, Uber has moved court only to counter a plea filed by it in court on February 17 against Uber’s practice of plying diesel vehicles in Delhi. Only CNG cabs are allowed in the city. Uber denies running diesel cabs in Delhi. The court will hear Uber’s plea on September 14 and Ola’s is on April 18. The courts cases are the latest salvo between the country’s principal taxi hailing companies against each other in what is turning out to be a bitter and protracted battle for domination of India’s streets. At stake is a market worth $15 billion. Uber has a fearsome reputation of taking on competitors in every market it has entered. It is not for nothing that it is the most valuable American company of its generation. But India could be a different ballgame. Bitter Rivals For one, it has a rival who is willing to take competition head on. Ola, run by Bengaluru headquartered ANI Technologies, seems to be closely tracking its main competitor’s strategies in key markets. Indeed, the charge of false bookings and cancellations that Uber, headquartered in San Francisco, has levied against Ola in India, was lobbed at Uber by rival service companies Lyft and Gett in the US market. For another, the rival has some deeppocketed backers. Ola is funded by A-list investors such as SoftBank, Tiger Global, DST Global and others. One of its backers happens to Didi Kuaidi of China, the world’s largest app based cab provider, ahead of even Uber in the Chinese market, and valued at $20 billion. In November 2015, Didi Kuaidi was part of a consortium that invested $500 million in Ola. On the streets, Uber and Ola have gone head to head so far. Both thrive on offering services that are cheaper, cleaner and more reliable than traditional taxis. To get drivers on board Ola runs special programs like Ola Pragati, where driver can avail of a loan from State Bank of India, buy a car and drive for Ola. It also gets drivers via referrals. High performing drivers called OlaStars get additional benefits like cash back, fuel subsidy and scholarships for their kids. Uber runs a similar referral program called ‘Uber Dost’ and loan melas (fairs) to rope in new drivers. High performers join Uber Club with benefits on health, free insurance, education subsidy for kids and so on. Both have almost similar offerings. They have cars of different sizes offering various slabs of fares. For example, the cheapest rides on OlaMini and UberGo (hatchbacks) cost Rs 5 to Rs 8 per km. Both retain a 20% commission and the rest goes to the driver. Ola also offers e-rickshaws, launched on April 4, and bus shuttles. The fares undercut conventional taxis which offer a flat rate of Rs 23 per km for a sedan and Rs 16 per km for a hatchback (in Delhi) but increase when demand for rides is high. Uber fares had shot up by up to three times when the Delhi government introduced the odd-even car plan in January. Besides the similar fares and offerings, Uber and Ola have also matched the other in innovations. On March 3, Uber started a new category of services under bike taxis and Ola announced the same within 24 hours. They have also taken their battle to cab pooling and auto rickshaws. “We compete with Olawe believe competition makes us strive harder,” says Prabhjeet Singh, chief strategy officer, Uber India. Vijay Shekhar Sharma, founder Paytm says Uber is an alpha company that knows how to fight. “In New York it spent about $50 million to ward off resistance from Yellow Cabs in the $5 billion cab market there.” Uber uses Paytm wallet, besides Airtel wallet, cash and cardsdebit & credit, to help commuters pay for rides. Ola has its own wallet Ola Money and it also accepts cards and cash. According to an industry watcher, Ola does more rides per day than any other player in the country. (Both companies declined to reveal statistics on daily rides.) That could be a result of the head start Ola has had on Uber. It launched in 2011, two years before Uber entered India. Knowledge of the domestic market too helped, enabling Ola to ramp up fast. Today, Ola offers services in 102 cities and has 450,000 drivers on its platform compared with 10 cities and 30,000 drivers a year ago. Uber is present in 26 Indian cities with 250,000 drivers using the platform. Globally, Uber operates in 58 countries and 300 cities. Despite their similar products and fares, both companies have adopted a different strategy to long-term growth. Ola is not content with 102 cities it wants to expand to more cities. Uber is not excited about a 100-plus cities; it prefers to go deeper in the cities in which it is present, according to a spokeswoman. As it happens, the potential for growth in India is huge. So far, 80-90% of the business of the two companies comes from top 10 cities. The India market is also largely unorganised, with just 10% of the $15 billion being the share of organised players such as Uber, Ola, EasyCabs, Meru and others. Over time, both companies aim to become so popular and ubiquitous that hundreds of people give up their cars hop onto their taxis. “In technology business the biggest fear is winner takes all,” says Sandeep Aggarwal, founder Droom.in. “Five years back there were 100 plus companies in group buying business in the US. Today there’s only one Groupon. When the business is just an app, you want to chase and
Digital wallet companies like Paytm, Mobikwik won’t be roped in for toll collection
Payment technology firms like Paytm, Mobikwik and Citrus Pay are shut out of collaboration on toll collection on highways by the highways authority and the company executing electronic money collection at toll plazas. The payments company, National Payments Corp of India (NPCI), would go with full-fledged commercial banks, which appear to have covered a majority of the households that own cars, and truck drivers through debit or credit cards. “They (companies providing wallet services) might be interested, but the National Highways Authority of India has shown no interest and we have not suggested to NHAI to bring in non-banks,” said AP Hota, chief executive of NPCI, without specifying any reasons. The decision of NPCI, which is owned by banks, and the highway authority might be a blow to payment technology companies which have been eyeing businesses that originate at the governmental level. This could also be a sign of banks turning aggressive in their attempts to reduce the threat from these nimble technology firms. Digital transactions are growing so fast that giants such as China’s Alibaba are buying stakes in these firms. The value of transactions through wallets rose more than two-and-half times to Rs 2,251 crore in February from Rs 876 crore a year earlier. Total number of transactions jumped to 4.9 crore from 2.4 crore, data from the central bank showed. Mobile phones, which have become the preferred mode of transaction for the younger generation, saw the value jump toRs 46,473 crores in February fromRs 14,888 crores a year earlier. The numbers jumped to 4.3 crore from 1.9 crore. But some of the firms aren’t worried as they bet on the government’s thrust to use digital platforms for everything and say they could provide a superior technology. “Honestly, I am not worried, I am sure they will come around,” Nitin Misra, head of products at Paytm said. “There are cases where the government has been progressive in the past; RBI gave us the payment bank licence.” The implementation of a pan-India electronic toll collection system on national highways may help save Rs 87,000 crore, according to a joint study by the Transport Corporation of India and the Indian Institute of Management-Calcutta. The study said the cost due to the time spent at toll points alone adds up to Rs 27,000 crore a year. The extra fuel spent on slowing down and stopping at checkpoints costsRs 60,000 crore. While NHAI has not considered the use of digital wallets for recharging of electronic toll collection tags, Mumbai-based payments company Citrus Pay intends to become the payment gateway for the inter-bank clearing house that NPCI will set up for the etolling across national highways. “Even if NPCI wants to have only banks on board now, I am sure it will not be very difficult to influence this policy. Once they see that our users far outnumber the users of banks’ payments instruments, they will turn around to get us on board as well,” said Upasana Taku, cofounder of mobile wallet company Mobikwik.