Supreme Court threatens DGCA with audit of its licensing policies
he Supreme Court on Tuesday asked whether lucrative sectors were being handed out as “largesse” to private airlines to the detriment of state-run Air India. It threatened an audit of licensing policies to find out why the national carrier was making losses unless the government ensured that private airlines flew on routes that weren’t lucrative as mandated under the rules. The court was hearing a petition seeking a Delhi-Shimla flight, which the aviation ministry has been resisting on the grounds that the airfield was small and that Air India didn’t have planes of the right size. The bench comprising chief justice TS Thakur and justice R Banumathi threatened the Directorate General of Civil Aviation (DGCA) with an audit by former comptroller and auditor general Vinod Rai. Under route dispersal guidelines, all private airlines have to connect not-so-profitable routes as well. But most leave the task to the national carrier, causing it huge losses, the court had observed earlier. Appearing for DGCA, additional solicitor general PS Patwalia initially sought more time from the court to allow the regulator to revisit route dispersal guidelines to deal with lack of connectivity to areas such as Shimla. However, he later urged the court not to direct an audit by Rai. DGCA had no “skeletons” in its cupboard and nothing would come of such an inquiry, he said, seeking another opportunity to address Shimla’s lack of connectivity. Thakur was reluctant to grant him time, but deferred passing any order directing Rai to audit DGCA guidelines till April 22. “You are just promising to revisit the guidelines. You have not done anything,” he observed. “These airlines are not bothering on the not-so-lucrative routes. You are not insisting on it. You are giving the lucrative routes without insisting that they carry out their concomitant obligations to cover the not-so-lucrative sectors.” Thakur’s statements on the matter were forthright. “You need someone to call your bluff. This is a bluff. We need someone who will call your bluff. People are suffering because you are looking after operators’ economic interests and not the people’s interests,” he said. “Is it not the obligation of your policy to take care of the interests of Shimla? You have not done it.” Patwalia’s defence that many poorly connected destinations had been covered by air services didn’t appear to satisfy the bench. “We want results,” Thakur said. “We don’t want dilly-dallying tactics. There are a lot of skeletons in your cupboard. Let them all come out. It is time to open the process up to scrutiny.” The law officer denied this, saying the guidelines were transparent and being implemented strictly. Air India has been insisting that it will fly the route if the state government subsidised its losses, whereas private airlines have refused to do so.
Kingfisher Airlines fund trail: CBI plans to send letters rogatory to 4 countries
The Central Bureau of Investigation (CBI) has received information from the Financial Intelligence Unit (FIU) on Vijay Mallya investments abroad and now plans to send letters rogatory (a judicial request) to four countries including France, US, Switzerland and the UK to probe former Kingfisher Airlines fund trail. The central agency is probing allegations that Mallya diverted funds taken as loan from government banks to the now defunct Kingfisher Airlines. ET has first reported that CBI will send LRs to different countries on March 11. The Letters Rogatory (LR) is required to gather information which will be admissible as evidence in court. Mallya reportedly has several properties in US, UK, France and Hong Kong. He is reportedly living in London. A non-bailable warrant (NBW) may be issued against Mallya as he has failed to appear before the Enforcement Directorate in connection with the loan default case. The former liquor baron owes nearly Rs 7,000 crore to a group of 17 banks. The ED may either move a competent court in Mumbai to get a NBW issued against him or approach Ministry of External Affairs to revoke his passport. Mallya, on March 30, had submitted to the Supreme Court a repayment plan of Rs 4,000 crore by September this year. But the consortium led by the State Bank of India has rejected his proposal.
Pune to hire professional CEO for smart city project
Pune will be the first city among the first batch of 20 Smart Cities to hire a professional as the chief executive officer (CEO) to execute the ambitious project. In almost all other cities, bureaucrats have been posted as CEOs. Sources in the urban development ministry said the city administration has informed them about the decision and they will select the candidate by inviting applications from professionals. “This approach is good and prove more productive. As such, there have also been examples of central government bringing in professionals at secretary level,” said an official. The Smart City guidelines of UD ministry provides for appointment of CEOs to drive the concept and oversee execution rather than leaving these tasks to municipal bodies. The CEOs will be the executive head of special purpose vehicles (SPV) for each city like that for Metro rail projects where managing directors are the sole in-charge. They will hold office for a fixed tenure of three years. These SPVs will be headed by a divisional commissioner, collector, municipal commissioner or head of development authority. In Bhubaneswar, an additional chief secretary has been appointed as the head of the SPV. Almost all selected cities in the first lot have set up SPVs. As per Smart City Mission guidelines, central assistance of Rs 200 crore for each selected city would be released only upon incorporation of SPVs.
Ahmedabad locks horns with Mumbai over India’s international finance centre
The race and lure to set up India’s international finance centre is fast turning out to be a tale of two cities — Ahmedabad and Mumbai — and subtle politics playing out around the two western business hubs. At a recent meeting with finance and commerce ministry officials, managers of Gujarat International Finance Tec-City (Gift) — the special economic zone near Ahmedabad — said it would be against global best practices to have a second offshore financial centre in a country with partly-convertible currency, a person familiar with the discussion told ET. The concerns voiced by Gift comes at a time the Maharashtra government is trying to cobble together a plan with senior bankers to carve out a slice of Mumbai, India’s financial capital, as a global financial services centre that would over the years compete with Dubai and Singapore. Gift authorities fear that two finance centres would not only be unviable but could also confuse investors. “Besides, if Maharashtra is given the permission, it would be difficult to refuse other states.Even if the law allows, multiple centres could be a supervisory challenge for regulators like RBI and Sebi,” said a government official who attended the meeting where officials of the state-controlled Mumbai Metropolitan Regional Development Authority were also present. While Gujarat, under Narendra Modi’s regime, was the first state to make a serious effort to set up a global services and finance district — having applied in 2010 and received the central approval a year later — the Devendra Fadnavis government of Maharashtra has been trying over the past few months to revive the dream of building a finance SEZ in Mumbai where all leading banks, financial institutions, brokerages and stock exchanges are headquartered. Despite repeated recommendations from senior financial services experts in the last 15 years to create an offshore finance hub in Mumbai, earlier state government rarely pursued the idea which was put on the back burner after the market meltdown of 2008. Mumbai has the legacy. Many bankers would find it easier, but Gujarat has the first-mover advantage. In the last 60 days, deals worth $150 mn, mostly external commercial borrowings, have been struck in the Gift international finance centre (IFC),” said a senior banker. “Banks like Yes, Federal, ICICI have a presence in Gift, SBI will soon open shop while BSE and NSE have entered into MoUs,” the banker added. However, officials in the Maharashtra government believe that Gift can co-exist with IFC in Mumbai’s Bandra Kurla Complex. Indeed, in the second meeting of the task force (set up by Maharashtra to prepare a master plan for an IFC in Mumbai), a senior banker gave a presentation to Union Minister of state for finance Jayant Sinha on how two IFCs can operate in sync with each other. “We are trying to allay the Gujarat government’s apprehensions on the issue. It’s understandable,” said a state government official. Among the possibilities discussed was that BKC, where real estate is expensive, can house high-value and front-end operations while back-end offices requiring more space can be in Gujarat. Maharashtra is yet to identify 50 acres of land — the minimum required for a multi-services SEZ — as against Gift which is spread over 886 acres with the finance centre occupying 261acres. “Chicago and California had also wanted to be an IFC like New York, but they didn’t succeed. A finance centre is not just about real estate and infrastructure, but also about tradition and quality of life,” said another Maharashtra government official. The Union Budget has proposed scrapping securities transaction tax, commodities transaction tax, dividend distribution tax in Gift besides lowering minimum Alternate tax ( MAT) from 18.5% to 9%. The SEZ also attracts sops such as reimbursement of Provident fund contribution, electricity duty exemption and rental subsidy from the Gujarat government. Maharashtra, under the circumstances, may have to tread carefully. On one hand, building a full-fledged SEZ would pose a challenge to Gift which has the backing of the Prime Minister. On the other hand, it cannot disregard the importance of Mumbai with the regulations and tax rules for IFCs now in place.
Ministry wants Kejriwal government to pay Rs 10,000 crore for 8 new elevated corridors’ construction to improve Delhi traffic
The road transport and highways ministry wants Delhi’s Kejriwal government to pay Rs 10,000 crore for the construction of eight new elevated corridors linking the eastern and Western peripheral expressways to improve traffic situation in Delhi. The centre has proposed link road projects worth Rs 20,000 crore that can provide direct connectivity between the Eastern and Western Peripheral Expressways through Delhi. The issue was taken up on Tuesday during a meeting between road transport and highway minister Nitin Gadkari and Delhi Chief Minister Arvind Kejriwal. Work on the both the expressways, which will work as an outer ring road for Delhi, has already started. The two expressways will help divert the long-haul inter-state heavy vehicles from Delhi roads and the proposed link roads will allow seamless exit of local traffic to take the expressways. “Since these projects are planned to decongest Delhi that would also significantly cut down on the pollution, the state government should bear half the total project cost. We have communicated this to the Delhi government,” a senior transport ministry official said. The shipping ministry and the Delhi government will also sign a state support agreement for cleaning of Yamuna river front and making the river navigable.
Passenger growth, lower fuel prices to boost revenues of airlines
Earnings of Indian carriers are likely to be high in the the March quarter, too, as jet fuel prices are down over 23 per cent from last year. Strong passenger growth will help domestic airlines improve their top line and margins in the March-end quarter, analysts say. With traffic growing well over 20 per cent and load factors elevated at 85 per cent, airlines are likely to fare well in what is known to be a seasonally weak quarter. Aviation turbine fuel price is 23.7 per cent lower at around Rs 37,900 per kilolitre in January-March 2016 on a year-on-year basis and this could boost airline margins. According to an analyst poll by Bloomberg, SpiceJet is estimated to show 70 per cent revenue growth on a year-on-year basis while Jet Airways’ revenue, excluding other operating income, is expected to rise 15.5 per cent. IndiGo had earlier indicated its revenue would rise six-eight per cent on a year-on-year basis, but analysts expect it to do better than that on strong demand. Bloomberg has not shared a comparative year-on-year figure for IndiGo. On the flip side, however, a six per cent depreciation in the rupee and pressure on yields due to softening of fares will impact profitability of carriers. While Jet Airways and SpiceJet are expected to post growth in profitability, IndiGo has warned that its profit will be impacted by the rupee depreciation.
5-year rule for airlines to fly abroad may go
The rules for local airlines to fly overseas, a highly contested policy issue within the industry, are set to change with the government ready to abolish one of the current eligibility conditions while keeping the other. The condition of flying on domestic routes for five years for an overseas permit doesn’t feature in a note circulated by the civil aviation ministry for inter-ministerial consultations on Friday. But it keeps the requirement of a minimum fleet of 20 aircraft. There is an addition as well: every airline will have to maintain 20% of the total capacity in the domestic sector all the time. This is likely to be the final policy because ministers have already met and informally approved it. “We have the consent of all these ministers and ministries and the cabinet approval should come by the end of this month,” said a senior aviation ministry official, who did not want to be named.
Oil oversupply on the market will be overcome in 2 years — head of Rosneft
Oil oversupply on the market will be overcome in the course of 2 years, president of Russia’s state-owned oil company Rosneft Igor Sechin said at the 2016 Commodities Global Summit in Lausanne. “The decisive factor of a sharp fall in oil prices is a significant excess of supply over demand. Today it looks that the oversupply will be overcome in two years,” he said. According to the head of Rosneft, during this period the surplus of supply on the market will be offset due to global growth of economy and consumption, depletion of existing fields, temporary shutdown of complex and underperforming projects. “That means that it will take some time to achieve the market balance that we find inevitable. During this period the market will be characterized by a continuing volatility and making good decisions will require a proper analysis of short-term and fundamental factors,” Sechin said.
India state refiners import diesel as private processors cut discounts
Indian state refiners may continue importing higher volumes of diesel for the next few months instead of buying locally as private domestic oil processors like Reliance Industries and Essar Oil have withdrawn discounts on taxes and shipping. India’s diesel use is rising along with an economy that is estimated to have grown by 7.6 per cent in the financial year just ended. Between April and February India’s diesel demand surged 10.8 per cent. To meet this soaring demand, the state refiners – Indian Oil Corp, Hindustan Petroleum Corp and Bharat Petroleum Corp – last year bought some 12 million tons of diesel from the private oil processors. And through the fiscal year that ended on March 31, the private refiners encouraged these purchases by absorbing the central sales tax and coastal freight costs for interstate cargoes shipped from their plants in western Gujarat state. Now the private refiners have asked their state peers to pay the sales tax and coastal freight, potentially making buying from Reliance and Essar costlier than imports, trading sources with knowledge of the matter said. “Instead of getting diesel from their private peers the state refiners have had to go to the market and import,” one trader said. Refinery sources said talks were continuing with the private refiners to rework the diesel prices. in the absence of a deal, Indian Oil Corp and Hindustan Petroleum have together booked about 400,000 tonnes of imports of the fuel in April, compared with just 70,000 tons in March, and they plan to take similar volumes in the following months if the deadlock isn’t broken, sources at the two firms said. Further tightening India’s diesel market, according to another oil products trader, is that the “private refiners are maximizing jet-fuel and cutting back diesel production because of better prices.” India’s private refiners have also boosted their fuel exports. The private firms say the tax increases on diesel and gasoline that safeguard federal revenue instead of passing on the benefits of falling oil prices to customers have made the discounted sales to state-run refiners unattractive.
Japanese consortiums bid for GAIL’s $7 billion tender
Two Japanese consortiums have bid for state-owned gas utility GAIL India Ltd’s USD 7 billion tender for hiring nine newly built ships for ferrying LNG from the US. Mitsui OSK Lines Ltd (MOL)-Nippon Yusen Kabushiki Kaisha Ltd (NYK Line) and Mitsui & Co Ltd is one consortium to have applied for the tender at close of the deadline on March 31, official sources said, adding that the other one is Mitsubishi Corporation-Kawasaki Kisen Kaisha Ltd (K Line) and GasLog L.. GAIL is seeking 9 LNG ships of a cargo capacity of 150,000-180,000 cubic meters to help transport liquefied natural gas (LNG) it has tied up from Sabine Pass and Cove Point LNG projects in US, with supplies slated to start from December 2017. The tender, which was re-floated in September last year, was originally to close on December 17 but postponed first to February 29 and then to March 31. Sources said only two consortiums put in bid at the close of the extended deadline. GAIL sought quotes in three lots of three ships each. One ship in each lot is to be built at an Indian shipyard. After postponing the deadline thrice, GAIL had in February last year scrapped the tender to hire nine LNG carriers to ferry gas from the US, with a caveat that three of them be Made in India. At that time no foreign shipyard was willing to share LNG shipbuilding technology.