DGCA mulls easing aircraft import norms; import of planes up to 18 years old may be allowed
Domestic airlines might soon be allowed to import aircraft that are up to 18 years old, with aviation watchdog DGCA proposing to ease the norms as government looks to boost regional air connectivity. Currently, local carriers are not allowed to import aircraft that are more than 15 years old. For making the relaxation, the Directorate General of Civil Aviation (DGCA) has proposed changes to a more than two-decade old regulatory framework pertaining to aircraft imports. The proposal to relax the aircraft import requirements comes at a time when the government is in the final stages of preparing the new aviation policy that would focus on improving regional air connectivity, among other areas. The watchdog has proposed that pressurised aircraft that are to be imported should not have “completed 18 years of age or 50 per cent of operating cycle”. A pressurised aircraft is one which is equipped to handle cabin pressure at an altitude of above 10,000 feet. Besides, such aircraft should not have completed “15 years of age or 75 per cent of design economic life or 45,000 pressurisation cycle”. These norms, once in place, would be applicable for use in scheduled, non-scheduled and general aviation operations. With respect to unpressurised aircraft, the decision on whether to give approval for import or not would be taken on a case to case basis after complete examination of the record of the particular aircraft being procured. Normally, DGCA does not allow import of unpressurised aircraft that are more than 20 years old. “Aircraft intended to be imported for air cargo operations shall not have completed 25 years in age or 75 per cent of its design economic cycles or 45,000 landing cycles,” the regulator said. Changes are being suggested to the Civil Aviation Requirement (CAR) related to ‘Age of aircraft to be imported for scheduled/non-scheduled including charter, general aviation and other operations’. This CAR was issued way back in 1993. The latest amendments have been proposed after detailed consultations amongst technical experts in the DGCA. Frank Clark Womens Jersey
Saudi Aramco studying offers for Indian oil refinery stakes: Dharmendra Pradhan
Saudi Aramco is considering proposals to buy stakes in Indian oil refining and petrochemical projects, India’s Oil minister Dharmendra Pradhan said on Monday, as the world’s biggest oil exporter seeks outlets for its oil. India, the world’s third-biggest oil consumer, imports almost 80 percent of its crude requirements, mostly from Middle Eastnations. In the first quarter, Saudi Arabia was India’s biggest exporter of oil, sending about 889,000 barrel per day (bpd) to the country, or about 21 percent of the total. Pradhan earlier this month met with Saudi Aramco chairman Khalid al-Falih and sought Saudi investment in a planned 1.2 million bpd refinery on India’s west coast, the expansion of the Bina refinery and a petrochemical plant at Dahej, he said today. “All the three we have offered to Saudi. The two sides will decide on the proposals in a time bound manner,” Pradhan told Reuters, meaning there are deadlines for reaching investment decisions. Saudi Aramco did not respond to an email from Reuters seeking comments. Three Indian state refiners – Indian Oil Corp, Hindustan Petroleum Corp and Bharat Petroleum Corp – plan to build the 1.2-million bpd refinery on the country’s west coast at a cost of more than 1 trillion rupees ($15.02 billion) to meet the country’s growing fuel demand. Bharat Oman Refineries Ltd is expanding the capacity of the Bina refinery in Central India by 30 percent to 156,000 bpd while OPAL, majority owned by Oil and Natural Gas Ltd, is building a petrochemical plant in Western Gujarat state. Saudi Aramco Chief Executive Amin Nasser last month said his company will is looking to expand its downstream investments in China, Malaysia, India, Vietnam and Indonesia. Saudi Aramco’s expansion into refineries in major markets help guarantee demand for its crude oil exports amid intensifying global competition. India will be the most important driver of world energy demand growth in the years to come with its oil consumption rising by 6 million bpd to about 10 million bpd by 2040, according to the International Energy Agency. In the fiscal year to March 2016, the country’s fuel demand surged at its highest pace in at least 15 years.
Next oil downturn? Looming gasoline glut threatens crude’s rebound
A rebound in oil prices this year from 12-year lows is in danger of coming to a crashing halt, as the main engine of global demand growth for the past several years starts to sputter amid signs of a gasoline glut. Crude oil has rallied more two-thirds from its mid-January nadir on robust demand from refineries worldwide, stoking cautious optimism among producers and exporters that the epic rout that slashed global prices by 75 per cent between mid-2014 and early 2016 is finally over. But rampant production of oil products, especially in Asia, is threatening to derail that recovery. Several major gasoline importing countries have started to export, as excess supplies of fuels overflow storage facilities and erode refinery profits. Inventories near historic highs “Asia has overcapacity in refining, so that’s ruining margins,” said Oystein Berentsen, managing director for crude at oil trading firm Strong Petroleum in Singapore. “Japan is exporting and product stocks are still building. In China, new refiners are exporting as much as they can, so they’re flooding the market. At some stage, the refining overcapacity will have an effect on crude.” Soaring output has left the world awash with cheap crude as supply exceeds demand by 1 million to 2 million barrels per day. That should be good news for refiners, but “crack spreads” – the difference between the cost of crude and its refined derivatives often used to estimate refining margins – on most oil products have slumped in Asia lately as output exceeds demand, causing inventories to swell. Even gasoline margins – the biggest source of profits for most refiners over the past year – are down nearly 40 per cent since March as storage hubs such as Singapore, where inventories are near historic highs of 15 million barrels, struggle to cope with the glut. With Asia’s big emerging economies driving most demand growth, the effects will be felt globally. “Asia contributed more than 50 per cent of global gasoline growth last year,” said Energy Aspects analyst Nevyn Nah. “Yet gasoline cracks are way lower this year compared to the same time last year because supply has overwhelmed.” Oil market analysts at Barclays said on Monday that “non-OECD product exports… have the potential to move prices lower over the next several months”. Falling profits Asian benchmark refining margins started 2016 near multi-year highs, spurring refiners to churn out as much fuel as they could. The impact of that oversupply was felt first in products such as heavy oil, including fuel for large ships that has been hit as Asian economies have slowed, and diesel, the main fuel for heavy industry. Diesel margins in China have fallen to six-year lows. And margins are coming under pressure in Europe and North America too, although they are still better for refiners than in Asia. “People have spent a lot of money in the past three to four years … to make more diesel because that’s what the world was desiring,” said John Auers, executive vice president at consultancy Turner, Mason & Co. The remaining bright star in refining had been gasoline, also known as petrol, backed by roaring car sales in China and India, where a combined 3 million new vehicles hit the road every month. In the United States, petrol demand is also strong, yet data from the US Energy Information. Administration (EIA) shows that stocks are only just below their highest levels seasonally since data became available in 1990. Rise of the teapots Gasoline margins in Singapore, Asia’s pricing benchmark, have collapsed by half since the beginning of the year to just over $7 per barrel as new exports hit the market. In Japan, where petrol demand is waning because of the stalling economy, a falling population and the rise of electric cars, refiners that used to import crude to supply home markets now target international buyers. “Domestic demand is on the decline,” said Yasushi Kimura, president of the Petroleum Association of Japan (PAJ), a refiners and distributors body, adding that as a result producers were “pursuing business opportunities overseas”. And in China the rise of independent refiners, known as teapots, has driven exports of gasoline and diesel as refineries churn out more fuel than even fuel-thirsty China needs. China’s diesel exports soared 316.5 per cent in March from a year earlier to 1.25 million tons, customs data showed on Thursday. Gasoline exports rose 9.1 per cent to 670,000 tons. With similar developments in Taiwan, Asia is seeing so much gasoline flooding the markets that even the rise of India isn’t able to absorb the surplus. Glut in refined products In Singapore, traders have started storing excess gasoline aboard tankers as they run out of onshore storage. Goldman Sachs already warned late last year that an emerging glut in refined products would eventually spill back into the crude market. “If all the major consumers sell off their gasoline, it begs the question who will buy it?” said one Singapore fuel trader. “The answer is that much will remain unsold and in storage, and once that happens prices will crash.” Detroit Lions Womens Jersey
EIL to provide consultancy to Bangladesh Petroleum Corp
State-owned consultancy firm Engineers India Ltd (EIL) today said it has signed a contract with Bangladesh Petroleum Corporation (BPC) for providing project management consultancy services for a $ 1.7 billion refinery expansion project. EIL will earn $ 16.54 million in consultancy fee for the project, the company said in a statement here. The contract has been signed on April 19. “This will be the largest ever single consultancy assignment for EIL in Bangladesh,” it said. BPC is expanding its Eastern Refinery at Patenga at the cost of $ 1.7 billion over the next three years. The expansion will take the refining capacity to 4.5 million tons from present 1.5 million tons per annum. Eastern Refinery Ltd was set up at Patenga in 1968 with an installed capacity of 1.5 million tonnes per annum. P. J. Williams Womens Jersey
BPCL gets green nod for Rs 694 crore LPG project in West Bengal
State-owned fuel retailer BPCL has got green nod for its Rs 694-crore project of developing LPG import terminal as well as storage, bottling and bulk distribution facilities at Haldia Dock Complex in West Bengal. At present, domestic production of LPG is around 12.38 million metric tonne per annum (mmtpa), much lower than the estimated demand of 18.65 mmtpa for this year. The proposed project aims to boost supply and help achieve the government’s target of making LPG available to each household by 2018. “Based on the recommendations of the Expert Appraisal Committee (industry), the environment ministry has given environmental clearance and Coastal Regulation Zone (CRZ) clearance to the BPCL’s project in West Bengal,” a senior government official said. The green nod is subject to certain specific and general conditions, the official said. The proposed project will ensure LPG supplies to far-flung areas of eastern and north-eastern regions and will create an infrastructure to import the eco-friendly LPG fuel, the official added. As per the proposal, Bharat Petroleum Corporation (BPCL) will set up an import terminal at Haldia to import 1 mmtpa of refrigerated Propane and Butane and transfer it through 7.5-km long twin transfer pipeline for LPG production, despatch of bulk LPG via road tankers and bottling of LPG in cylinders. The proposal also includes setting up of a bottling plant comprising two LPG-mounded bullet storage facility of 350 tonnes capacity each, besides loading facilities, allied machineries, loading gantries for bulk tanker and filled cylinder despatch through road within the land allotted. The estimated cost of the proposed project is Rs 694 crore, which is to be completed in a year from the date of award of the environment clearance. BPCL, one of India’s four major integrated petroleum refining and marketing companies, produces a diverse range of products from petrochemicals and solvents to aircraft fuel and specialty lubricants. The company markets its products through its wide network of petrol stations, kerosene dealers, LPG distributors, besides supplying fuel directly to hundreds of industries, and several international and domestic airlines. Jeff Beukeboom Authentic Jersey
Panel okays Punjab road project
The Public Private Partnership Appraisal Committee (PPPAC) has cleared a road project in Punjab with an estimated project cost of Rs. 1169.61 crore. This approval came at PPPAC meeting held here on Monday under the Chairmanship of Economic Affairs Secretary Shaktikanta Das. PPP Projects implemented by Infrastructure Ministries and Departments of Central Government are cleared by Institutional Mechanism. Sidney Jones Authentic Jersey
‘IRFC funding infrastructure good for nation’
In recent times, the Indian Railways has been able to raise funds at costs lower than the government through its fund-raising arm, the Indian Railway Finance Corporation (IRFC), which enjoys the same credit rating as the government. This is because the IRFC is backed by the revenues of Railways’ rolling stock, such as the engines, wagons and coaches. But, as the public enterprise gets into project financing for the Railways, the cost of funds for the Railways is likely to increase. However, according to Sanjoy Mookerjee, Financial Commissioner, Indian Railways, the Railways is taking this route to make cost of funds cheaper for the nation. Speaking to BusinessLine recently, Mookerjee shares how Railways has controlled costs and discussions with Finance Ministry on dividend payout. Excerpts: How has the Railways controlled costs? Traditionally, fuel was considered a fixed cost for the Railways. But, through inventory management and better efficiency, this has now become a variable cost. We are also reviewing the electricity contracts keeping in mind that lower average peak load should give us a substantial reduction. In our colonies, we are going for renewable energy and pre-paid card-based payments which are lowering costs. For all renewable energy usage on such projects, we also get rebates of up to 40 per cent from the Ministry of Renewable Energy. We will save on diesel in Rajdhanis and Shatabdis by drawing energy directly from engines instead of generator power cars. The power cars can be replaced with two coaches, which will generate revenue. The Railways also saved some fuel on account of drop in net tonne kilometre and gross tonne kilometre, which count railways’ distance and loading productivity. So, in 2015-16, the Railways saved ?3,500 crore in fuel account. It also saved over ?10,000 crore over the Budget estimates by controlling staff allowances. We had a shortfall of almost ?15,000 crore in revenues, but through these savings, we were able to reduce our fall to ?5,000 crore. Staff and pension costs are your largest fixed cost. Will the government share your pension costs? Staff cost is in two parts: first is salary and dearness allowance and pension, which are the fixed costs; second is the variable or staff allowances. Staff allowance has been tackled. Till now, we mostly do cash-based accounting. As regards pension, we manage it through a fund that is credited from our internal revenues every year, based on the number of pensioners and the statistics that we get from banks. We do not or cannot formulate a fund that will pay for itself through its investments. The National Pension Scheme is a contributory scheme for those who joined after 2004. So, accrual accounting is required to find out the liability for the next 20 years. What we see is that around 2020-21, there will be a peaking, and then it will start falling. So, we are working on the accounting reforms project, which will take another year to roll out. I don’t think we can have a dialogue with the Centre or any pension fund till the accounting reforms project is complete. With IRFC now funding infrastructure, will the Railways’ cost of funds be impacted? We are going for a little bit of international funding with due hedging. Tax-free bonds give us a rate of 7.2-7.8 per cent, which is cheaper than what the government borrows from international market. For the tax-free bonds, the weighted average cost to the Railways is 7.37 per cent with an average tenure of 13.51 years. Now, Life Insurance Corp funds, which cost about 7.98 per cent for 30 years with a five-year moratorium, are exclusively for infrastructure project finance. The question is do I go to the government, ask for more gross budgetary support and the government borrows money to pay us? This route may be cheaper for the Railways, but will be more expensive for the nation. India wants to reduce its fiscal deficit to 3 per cent. If this is done, India’s rating will go up. As a government department, it is our endeavour to help the government in this effort. Will there be a change in the proportion of IRFC funds deployed for rolling stock and infrastructure? Very little, we are doing something like ?20,000 crore annually. With the enlargement of the freight basket, we will need more wagons from IRFC. This will help the coal industry to some extent. Also, we are going for shipping and ports. So, coastal shipping and rail bridging has become a reality. Ports and companies are investing in mechanised loading and unloading on rail wagons and rakes are moving out from ports. This is a new phenomenon. On the dividend payment by the Railways to the Centre, has there been any breakthrough? Government of India is our owner. We are duty-bound to pay them dividend. Decision on dividend is based on two factors — what is the market cost of the capital and the recommendation of the Railway Convention Committee. When the market is down and cost of capital is less, obviously dividend will fall. But for the Railways, the final recommendation comes from the committee, which is then taken up by the Cabinet and finally approved by the Parliament after due consultations with the Finance Ministry. For example, the recommendation for 2015-16 has been made for 4 per cent, which is one of the lowest. We hope the Cabinet and Parliament approve this. But, non-dividend bearing funds have also been assigned to us. Of the gross budgetary support of ?45,000 crore, the Centre has provided ?10,780 crore, which is from the Central Road Fund or the diesel cess. This is a four-fold increase from the Budgetary support. Last year, we could get only get ?2,661 crore. We also hope to get something from the Swachh Bharat Fund for our bio-toilets. This is also a safety issue since human waste and water corrode our steel tracks and bridge girders. Right now, the Railways are using own funds, such as depreciation reserve fund (DRF), to
Centre, Bihar government agree to resolve Patna Airport upgrade issues
Prime Minister Narendra Modi and Bihar Chief Minister Nitish Kumar may differ politically, but their governments at the Centre and state have reached a common ground to resolve the issues surrounding Patna airport. As part of the solution, a new terminal will be built at the existing airport in Patna in the first phase and the airport, in the second and final phase, will be eventually shifted to an Air Force base in Bihta near Patna, where the state government will acquire 70 acres of land. The central government will invest Rs 1,200 crore in building terminals at both the existing and the proposed airport. While the new terminal at the existing airport is likely to come by 2018-19, the new terminal at the Bihta airport is likely to come by 2019-20. Patna, along with Jammu and Leh airports, have been termed unsafe for flight operations by the aviation regulator and the International Civil Aviation Organisation (ICAO) has raised concerns over it in its audit. “The process to build the new terminal will begin immediately after the state government provides land near the existing airport. There’s nothing that can be done to expand the runway at the existing airport and the airport will eventually be shifted to an Air Force base in Bihta. The state government will send a proposal now,” said a senior aviation ministry official, who did not want to be identified. The plan was decided after aviation secretary RN Choubey, Joint Secretary (airports) Arun Kumar and Airports Authority of India (AAI) chairman S Raheja met Bihar’s chief secretary and other state officials in Patna. According to the plan, the state government will provide about 10 acres of land near the existing airport to build the new terminal. “The state government owns about 10 acres of land near the existing airport. This land will be given to AAI in a swap deal, wherein the airport operator will give the state government a 10 acre land parcel inside the city for the land near the airport. AAI will build a new terminal with a capacity of 3.0 million passengers per annum,” said the official. The capacity of the existing terminal at Patna airport is 0.5 million passengers per annum and the airport witnessed a 32% surge in the total number of passengers travelling during April-February 2015-16 compared with the same period a year ago. The airport is also likely to cross the annual 1.5 million passenger limit to become a major airport (according to rules, any airport that caters to over 1.5 million passengers annually becomes a major airport). Under the second phase, the airport will be shifted to Bihta airbase. “The state government will acquire 70 acres of land near the Bihta airbase to construct a new terminal for passengers. The state government will also have to widen connecting roads to the proposed airport,” said the senior official. The Bihta airbase has a 9,000 feet runway and is spread across an area of 9,000 acres. Leo Komarov Womens Jersey
Raghuram Rajan warns against deep discount model in startup space
With concerns being raised about cash-burn in burgeoning e-commerce sector, RBI Raghuram Rajan today made it clear that getting revenues through deep discounting is not a viable business model for startups. “If the only reason you are getting revenues, not profit, is because you are selling based on 50 per cent discount, it can’t be viable in the long run,” he said. He was quick to acknowledge that many businesses are in different stages of their life-cycle with some trying to establish the viability. “All these businesses are trying to establish viability, some are still being financed in a big way,” he said, adding that it is natural for some of them not to work which will lead to shutting down the business. He was speaking after delivering the YB Chavan memorial lecture here at state secretariat. The remarks come amid dwindling valuations of some successful Indian startups, which are being partly attributed to the high stress on discounting in the business model. Many of the startups depend on capital injections from venture capital funds and some have also closed down. “I think this (shut down) is a natural process and we should not stand in the way and lament too much,” Rajan said, making a strong case for policies which will make it easier for startups to exit so that resources can be used productively. Given the competitive nature of things, it is also essential to have safety covers including health insurance, unemployment insurance and pensions, he said, adding that such nets can ensure “social peace”. Welcoming that it has become “reputable” for being an entrepreneur, Rajan made a plea for being resilient, saying “the enterprise started by an entrepreneur can fail, the people should not fail”. He said the conditions for starting up are improving by the day on the back of interventions by the government and regulators which have upped the infrastructure and logistics support. However, there is a lot which needs to be done, he said, flagging skilled talent as a key prerequisite for the country. There are many other soon to be introduced aspects which will help the startup ecosystem, Rajan said, pointing out to Bankruptcy Code which he expects to be introduced in the current session of the Parliament, and also the introduction of the Small Finance Banks. He also said that the bankers while dealing with stressed loans with small businesses should also understand that the smaller firms do not have the same mettle to take every case to a court as a big business does. “I said easy exit (for startups) but it should not be unfair exit. With respect to small firms, creditors often have draconian powers which large firms can limit in courts. Something like Sarfaesi. A large firm has a better way of dealing with it in the court than a small firm has. “The banker may have much more power over the small firm with Sarfaesi than it has over large firms. Because we want to get the money back from the large firms, we continue to make the power harder. So, we have to be a little careful. Balance it out. The small firm should not be put out of business too fast while large firms stay in business too long simply because the large firm has easier access to good lawyers. Marshall Newhouse Jersey
As companies get performance-driven, India Inc CEOs could soon lose comfort of fixed pay
India Inc’s big bosses are losing a compensation comfort they enjoyed vis-a-vis chief executives in other major economies more than half of Indian CEOs’ pay will soon be variable, linked to performance. This is a big change. Just five years ago, less than a third of Indian CEOs’ pay was variable. Data from a CEO compensation survey of 380 companies in India show that more than half of the CEO pay is tied to performance. This means that just about 50 per cent or less of the CEO salary is fixed, and the remaining is performance-linked and distributed in annual bonus and long-term incentives. And the fixed pay component of CEOs is likely to shrink further. If global compensation structures are any indication, CEO compensation in India will get increasingly geared towards results in the coming years. The executive compensation survey 2015-16, shared exclusively with ET, was conducted by Aon Hewitt across eight industries. One of the leading factors for high percentage of pay for performance is pressure from shareholders, which has prompted companies to tie a greater percentage of their CEO compensation to outcomes and results. “CEO compensation is outcome-driven. Shareholders need to see there is connection between compensation and outcome. As CEO compensation increases so does percentage of performance-linked pay,” said Anandorup Ghose, partner, Aon Hewitt. Fortune 250 companies have almost 70 per cent allocation to longterm incentives, according to compensation experts. Globally, pay for performance can account up to 85 per cent of CEO salary. Listed companies have higher proportion of variable pay and long-term incentives compared with non-listed counterparts, reveals the survey. Close to 60 per cent of CEO salary in listed companies is at risk. “Listed organisations are more aggressive in pay for performance, and these would also pay a chunk of CEO salary in ESOPs (employee stock option plans). The upside for listed companies is that markets are funding the CEO compensation,” Ghose adds. Compensation experts point out that the promoters who were earlier very conservative in sharing gains or ownership with professional CEOs are enabling long-term incentive and wealth creation to attract and retain best talent senior executives from multinational corporations. Professionals are too welcoming this change, as they consider it fair that companies structure compensation in a way where they have potential to earn more if they contribute to the growth of the company. Sense of ownership “Companies are looking for professionals who come with a sense of ownership. The best way to demonstrate that is if a professional is willing to have a major part of his/her compensation come through long-term incentives,” says Pallavi Kathuria, who leads Asia-Pacific technology practice for leadership advisory firm Egon Zehnder. Across sectors, the ‘pay at risk’ is highest in the financial services, followed by services sector, according to the survey. However, the quantum of variable pay is determined less by nature of the industry and more by the impact on the business in a particular industry of variables that are either in the control of the executive or doors that are beyond his/her control. In sectors such as infrastructure, large capital goods and mining industries where the intervention of the government policies and regulation is quite high the total proportion of variable pay is on the lower side between 20 per cent and 30 per cent, another compensation expert said. So what does the future hold? “We may see a little bit of stabilisation in the structure from here on in India. However, as the companies grow in size and if western markets are any example to go by, we believe that greater amount will be allocated to long-term incentives in future,” says Anubhav Gupta, solution head (executive compensation), Aon Hewitt. In terms of salary increment at CEO and CXO levels, the survey shows a marginal drop in fixed pay increase to 9.5 per cent in 2015-16 from 9.7 per cent last year. According to the survey, stock options continue to be most dominant long-term incentive being used by companies. Executive compensation survey 2015-16 conducted by Aon Hewitt saw participation from 380 companies across eight industries. It was conducted between July 2015 and November 2015. Logan Cooke Womens Jersey