New airport terminal to be opened on Jan. 12
Chief Minister N. Chandrababu Naidu and Union Minister for Civil Aviation Ashok Gajapathi Raju will inaugurate the new terminal of the Vijayawada airport on January 12. Vijayawada MP Kesineni Srinivas (Nani) along with Airport Director G. Madhusudhan Rao on Monday visited the airport premises and inspected works that were nearing completion. To cater to the increasing passenger traffic, the construction of the new airport terminal—which will act as an interim terminal before the International terminal is built—began on October 8 last year. The works are expected to be completed by January 7. Bo Jackson Womens Jersey
GST may impact air ticket prices by 9-12%, says report
“Given the price sensitivity of Indian passengers, this could have a significant negative impact on demand. The implementation of GST may also result in higher upfront costs for aircraft and leases, spares and parts, and distribution costs, increasing cash flow requirements, although airlines will receive input tax credits later,” it added. The government is pushing for a new tax regime this year. The report also pitched for an “urgent review” of the country’s civil aviation policy, warning that it could “prove to be a hindrance” to the development of the sector. The India Aviation Outlook 2017-18 report said that “design flaws” in the policy, particularly with respect to regional connectivity, ground handling and bilateral policy, mean that it will be “difficult to implement in practice”. It could “inadvertently act as an obstacle” to achieving desired objectives, the report warned. Nikita Zadorov Womens Jersey
Local simulator training facilities must: DGCA tells airlines
Airline operators having more than 20 aircraft of one type should compulsorily have simulator training facility within India, aviation watchdog DGCA has said months after detecting lapses at an overseas simulator training facility used by IndiGo . Issuing a Civil Aviation Requirement (CAR), the regulator today also said domestic operators should “progressively” reduce the use of overseas simulator training facilities. “Operators with more than 20 aeroplanes of one type shall have owned/leased simulator capacity within India for that type by December 31, 2018,” Directorate General of Civil Aviation (DGCA) said. In June last year, DGCA had ordered budget carrier IndiGo not to train its pilots on one of the two simulators at a training centre in the UK following an inspection of the facility and the subsequent detection of the malfunctioning in one of the two such machines. At present, airlines shell out a significant amount towards training of pilots overseas and having enough number of simulators in the country itself would help in reducing the overall costs for the carriers. Alexei Kovalev Womens Jersey
ONGC, Cairn India demand lowering of cess on crude
Ahead of the Budget, state-owned oil producer ONGC and private sector Cairn India have asked the government to cut cess on crude oil saying the switchover from fixed to ad valorem rates had turned things from bad to worse. The producers want the government to cut the cess to 8 per cent of the price they realise on sale of domestically produced crude oil. In the previous Budget, Finance Minister Arun Jaitley had converted Rs 4,500 per tonne fixed cess on crude oil to 20 per cent ad valorem. “The 20 per cent cess rate provided benefit for a temporary period only up to moderate crude prices,” their association PetroFed last month wrote to Revenue Secretary Hasmukh Adhia. With the oil cartel OPEC deciding the cut production, global oil rates have started moving up. “As a result the domestic producers of crude oil are again feeling the pinch with 20 per cent ad valorem cess and are in fact in a much worse off than before,” PetroFed wrote. It said there was an urgent need to reconsider the issue and provide the much needed relief to the domestic oil producers. “On behalf of industry, we would once again like to submit for an expeditious correction in the levy of cess on domestic crude oil production from 20 per cent to 8 per cent of the realised price of crude oil,” it said. PetroFed said reducing the cess rate would help to expeditiously increase oil production, meeting vision of ‘Make-in-India’ and enhance energy security. The Oil Industry (Development) Act, 1974 provides for collection of cess as a duty of excise on indigenous crude oil. Cess incurred by producers is not recoverable from refineries and thus forms part of cost of production of crude oil. The cess was levied at Rs 60 per tonne in July 1974 and subsequently revised from time to time. During 2005-06, when crude oil prices had increased from an average of USD 40 per barrel to USD 60 per barrel, OID Cess was increased from Rs 1,800 to Rs 2,500 per tonne from March 1, 2006. Again, when the crude oil prices increased to over USD 100 per barrel, the rate of cess was increased by the government to Rs 4,500 per tonne (USD 10 per barrel) with effect from March 17, 2012, PetroFed wrote. It said the government had effectively linked the cess rate to prevailing crude oil prices in the past. Most of crude oil produced in India comes from pre-NELP and nomination blocks and is liable for payment of cess. While New Exploration Licensing Policy (NELP) blocks like Reliance Industries’ KG-D6 area are exempt from payment of cess, pre-NELP discovered blocks like Panna/Mukta and Tapti and Ravva pay a fixed rate of cess of Rs 900 per tonne. Dominik Hasek Jersey
OVL qualifies to bid for Iran oil, gas projects
ONGC Videsh Ltd, the overseas arm of state-owned Oil and Natural Gas Corp (ONGC), has won rights to bid for oil and gas development projects in Iran. OVL is among the 29 international oil companies from more than a dozen countries that Iran has pre-qualified to bid in the upcoming tender for oil and gas projects, according to the list put out by National Iranian Oil Co (NIOC). Others on the list include Royal Dutch Shell Plc, China National Petroleum Corp (CNPC), Total SA of France, Russia’s Gazprom and Eni of Italy. Iran, the holder of world’s fourth-largest oil reserves and OPEC’s third-largest oil producer, is hoping to attract as much as USD 150 billion in foreign investment in its oil, gas and petrochemicals sectors over the next few years. The list of pre-qualified firms also included Malaysia’s Petronas, Russia’s Lukoil, China’s CNOOC and Sinopec, Inpex of Japan, KOGAS of Korea. Most of these companies have been involved in Iran’s oil industry projects before the US- tailored sanctions were imposed against the country in 2011. Newcomers include Wintershall from Germany, Maersk from Finland, DNO from Norway and CEPSA from Spain, according to the NIOC list. US oil services provider Schlumberger Ltd was also among those identified, according to the NIOC website. OVL is already present in Iran. In 2008, it had discovered the Farzad-B gas field in the Farsi block in Persian Gulf. The discovery has an in-place gas reserve of 21.7 trillion cubic feet, of which 12.5 tcf are recoverable. “We are in negotiations with Iran for development rights of Farzad-B field,” a senior company official said. “Discussions on continuing a development plan that we submitted to Iranian authorities. We are hoping negotiations will continue soon.” Gas produced from the field can either be converted into LNG by freezing at sub-zero temperature and shipping in cryogenic ships to India or transported through a pipeline — via overland passing through Pakistan or sub-sea. The official said the OVL will definitely look at participating in the bid round that Iran will hold using a new, less restrictive Iran Petroleum Contract (IPC) model. The IPC model ends a buy-back system dating back more than 20 years under which Iran did not allow foreign firms to book reserves or take equity stakes in Iranian companies. Under a buyback deal, the host government agreed to pay the contractor an agreed price for all volumes of hydrocarbons the contractor produces. But now, NIOC will set up joint ventures for crude oil and gas production with international companies which will be paid with a share of the output. Also, different stages of exploration, development and production will be offered to contractors as an integrated package, with the emphasis laid on enhanced and improved recovery. The new IPC is said to be more flexible terms that take into account oil price fluctuations and investment risks. Al Horford Womens Jersey
PMO seeks detailed report of Air India’s performance
With the NDA government set to present its third Budget next month, the Prime Minister’s Office has sought a detailed performance report from flag carrier Air India, which is surviving on a ?30,000-crore bailout package from the exchequer. Top Air India management is expected to make a presentation in this regard during a review meeting at South Block later this week, sources said on Monday. The government-run carrier reported operating profit of ?105 crore, the first time since the merger of erstwhile Air India and Indian Airlines, in the previous fiscal mainly on account of low fuel prices and discounted ticket sales, among others. “These review meetings are a part of the monitoring mechanism since the government is infusing funds in the carrier,” an airline official said on condition of anonymity. According to the official, besides giving a presentation on the current financial position of the airline, the proposal to increase retirement age in Air India from the current 58 years to 60 years and its request for more funds for the current fiscal are also expected to come up for discussions. Air India is surviving on a ?30,231-crore bailout package extended by the previous UPA government in 2012 for a 10-year period and also equity support for payment of principal/interest of the non-convertible debentures. William Hayes Authentic Jersey
India likely to add more than 9 GW solar capacity in 2017: Mercom
New solar capacity addition in India is expected at over 9 GW during the current calendar year 2017, according to Mercom Capital Group, a global clean energy communications and consulting firm. The calendar year 2016 saw solar installations at about 4 GW as against 2.3 GW installed in 2015. “We are forecasting installations to reach over 9 GW in 2017, which would put the Indian solar sector in the big league along with China, the US, and Japan. However, there are significant headwinds in terms of transmission and evacuation issues that could threaten the pace of growth,” said Raj Prabhu, CEO and co-founder of Mercom Capital Group. The share of solar generation continues to grow with 16.7 per cent of new power generating capacity added in 2016 (as of November 2016). Cumulative solar capacity, including large-scale and rooftop projects in the country, reached 9.6 GW. The top 10 states — Tamil Nadu, Rajasthan, Gujarat, Andhra Pradesh, Telangana, Madhya Pradesh, Punjab, Karnataka, Maharashtra, and Uttar Pradesh — account for about 90 per cent of all solar installations and pipeline. Indian government agencies have announced solar tenders of about 3,781 MW during the September-December 2016 period and auctioned about 1,311 MW. However, auction activity has slowed over the last three months. The project development landscape has changed significantly over the last quarter, due largely to Chinese module price declines. The average selling prices (ASPs) of Chinese modules in India have declined by approximately 10 per cent since August and by about 30 per cent over the last 12 months. This decline in prices has provided a much-needed boost to developers that won projects at low bids and were struggling to make project economics work, it said. Currently, the major concerns for the industry are related to transmission, evacuation, curtailment, timely payments and the outcome of the goods and services tax (GST). “Solar park development is experiencing some setbacks due to incomplete infrastructure,” felt Prabhu. “In some cases, developers are incurring expenses to clean the land, build roads, and are waiting for power to be evacuated after commissioning. All of this is having a negative effect on project cost and profitability,” he added. Mercom pointed out that demonetisation had caused a temporary setback in the industry. Richard Rodgers Jersey
Power transmission investment likely to be at ~2 lakh crore: CEA
Indicating significant growth in the power transmission sector, the Central Electricity Authority (CEA) has estimated an investment of Rs 2.6 lakh crore till 2022. These and other estimates form the base for a draft National Electricity Plan-Volume II, which would be the basis for investment and policy planning in the sector. Inter-regional capacity addition during the 13th plan (2017-22) is estimated at 45,700 Mw, from the present 63,650 Mw by the plan end, said CEA in the draft. The investment figure, it said, included an estimate of Rs 30,000 crore in transmission systems below 220 kv. About Rs 1.6 lakh crore would come from states and the other Rs 1 lakh crore from Power Grid Corporation of India. The government is planning to increase the size of projects and scope of work in transmission. Inter-state lines with capacity of around 56,000 Mw are being planned by the end of the 13th plan. In the first volume, CEA had said more more thermal power GENERATION capacity wasn’t needed but supply needed to be more accessible and affordable. And, that renewable energy generation would be 20.3 per cent and 24.2 per cent of the total energy requirement in 2021-22 and 2026-27, respectively. CEA says the already planned transmission corridors between regions is sufficient to cater to variable dispatches at peak times, with provisos. The estimate is that India would need 100,000 circuit km (ckm) of transmission lines and 2,00,000 MVA transformer capacity of substations at 220 kv and above voltage was expected to be added in the 13th plan. It has suggested that investment be invited through competitive bids. “It is expected that a total of 107,454 ckm of transmission lines and 287,836 MVA of substation transformation capacity additions are likely to be achieved during the 12th plan,” it has said. Various high capacity transmission corridors are in various stages of implementation and most are likely to be commissioned by 2021. Darren Sproles Jersey
Higher Budgetary Support To Drive Road Builders In 2017
The infrastructure sector, considered the growth engine of the economy, started 2016 on a promising note. While the sector has not recovered from the sluggishness prevailing since 2015, certain segments like roads have witnessed a considerable pickup of late, a report by IIFL Private Wealth Management said. Higher budgetary allocation and aggressive targets by Union Road Transport, Highways and Shipping Minister Nitin Gadkari held out hope. Regulatory approval for infrastructure investment trusts and the government’s new arbitration norms were expected to ease stress. But like for other sectors, withdrawal of old Rs 500 and Rs 1,000 currency notes has brought uncertainty to the infrastructure space. Analysts still see a silver lining and anticipate a higher allocation for infrastructure and roads in the next budget. A Recap Of ‘2016’ In the Union Budget of 2016-17, capital outlays for the road transport and highways ministry were increased by 49 percent to Rs 1,03,286 crore from Rs 69,422 crore allocated in the previous year. Gadkari set an ambitious target of awarding 25,000 kilometres of road projects in 2016-17 as against 10,000 kilometres in the previous year. The minister has, however, lowered his target of building new roads, conceding that his ministry will fall short of 40 kilometres a day. Analysts feel the targets weren’t realistic but the sector could outdo previous year’s achievements. NHAI is most likely to miss its ambitious targets of initially announced 25,000 km set for the year by a huge margin on the back of delay in awarding orders and appointment of its new chairman, Yudhvir Singh Mali. However, the existing gap between deliverables and targets may narrow down since 40-50 percent of orders are awarded in the last three months of the financial year. Vibhor Singhal, Lead Analyst, Phillip Securities Pte Alok Deora, assistant vice president at IIFL, agreed that the initial target of awarding 25,000 kilometres road projects in the the current financial year was ambitious. Considering the pace of awarding projects so far, it may end flat year-on-year at 10,000 kilometres, Deora said. In the (financial) year so far, road awarding has witnessed a 7-8 percent growth in April- November 2016 over the previous year. Though the initial target of 25,000 km set by the government might be a tall ask, the sector might just be able to outdo its previous year’s performance of 10,000 km. Divyata Dalal, AVP – Institutional Equities, Systematix Shares & Stocks India Besides, the higher spends and wishful targets, implementation of announced reforms and policy initiatives kept the space abuzz. Infrastructure Investment Trusts: More than two years after SEBI issued guidelines for infrastructure investment trusts (InvITs), the capital markets regulator in 2016 allowed three companies — IRB Infrastructure Ltd., GMR Infrastructure Ltd. and MEP Infrastructure Developers Ltd. — to launch the trusts. InvIT — a good initiative, would help developers de-leverage and allow them to execute more projects. This definitely seems to be a trigger from where the investments would kick in. Alok Deora, AVP – Research, IIFL Arbitration Guidelines: In order to expedite resolution of claims stuck in arbitration for years, the government has approved new guidelines, which allow releasing 75 percent of the amount against a margin free guarantee in a situation where awards have been given by the authorities concerned. Government has done its bit to restore investors’ confidence, with release of 75% of the money in the arbitration award being the big positive for this space. This new norm is expected to provide much-needed liquidity for the infrastructure sector. Also, the government spending more and taking more policy initiatives to lift this space, given its tangible characteristics. Divyata Dalal, AVP- Institutional Equities, Systematix Shares & Stocks India Hybrid Annuity Model: To revive public-private partnerships in highway construction, the government introduced the Hybrid Annuity Model at the start of 2016. HAM has seen significant traction since the government provides 40 percent of the project cost to the developer to start work while the remaining investment has to be made by the developer. A lot of HAM projects have been awarded so far in this year and the pipeline of HAM projects remains huge. The government is betting big on it as it’s the key driver in road awarding in coming period. Alok Deora, AVP – Research, IIFL Room For Correction? The Nifty Infrastructure Index has fallen 2 percent in 2016 compared to 3 percent gains posted by the NSE Nifty50 Index. Share prices of prominent road building companies like IRB Infrastructure (down 19.5 percent), GMR Infrastructure (down 27.7 percent) and Reliance Infrastructure Ltd. (down 14 percent) have declined substantially. Analysts expect the index’s price-to-earnings ratio to correct to 15.8 times in 2017 from 20.2 times as it currently stands, indicating further downside for stocks in the index. However, the index’s price-to-book ratio is expected to rise to 1.68 times as compared to its current 1.54 times. Demonetisation Demon Prime Minister Narendra Modi surprised the nation on November 8 by demonetising old Rs 500 and 1,000 notes. While most sectors reacted negatively, the full impact of demonetisation is yet to be ascertained. Demonetisation is expected to curtail private and state capital expenditure in the infra space but spending by the central government is likely to remain strong, said Deora. Cash crunch post demonetisation led to a temporary halt in toll collection on state and national highways across the country. Major players have hinted at 75-100 percent compensation from the government for the loss incurred, IIFL’s Deora said in his report, adding that there has been no clear indication from the government in terms of timing, mode of payment and the quantum of compensation. Demonetisation may also impact traffic growth as the economic activity is likely to slow down in the near term. Tolling companies, which had seen a pick-up in traffic after two to three years of sluggish growth, now fear weak toll revenue growth. But there is also an upside. Phillip Securities’ Singhal said that though the impact of demonetisation needs to be evaluated, increased liquidity in
Hybrid annuity road projects face financial closure hurdles
Some of the road projects under the new hybrid annuity model (HAM) that attracted aggressive bidding this fiscal year are struggling to achieve financial closure as banks remain cautious, developers and analysts said. Under HAM, the government commits up to 40% of the project cost over a period and hands the project to the developer. The developer has to fund the balance with debt and equity, and is paid annuity income in instalments. The model was designed to make it safe for banks and investors. Satish Parakh, managing director at roads developer Ashoka Buildcon Ltd, said some lenders are “not happy” with the hybrid annuity model. “Some of the banks are refusing to finance on the basis of those documents, and only a few banks are coming forward for the hybrid annuity model. They have some reservations which they are discussing with the NHAI. The other part is that some companies are finding it difficult to put equity,” said Parakh said. He added the company had achieved financial closure of its HAM project. Like all public-private-partnership (PPP) projects, HAM projects too are facing issues with financial closure, said K. Ramchand, managing director, IL&FS Transportation Networks Ltd (ITNL). ITNL, which has the largest portfolio of build, operate and transfer (BOT) road projects, has bid for HAM projects in various states but not announced a win so far. Out of the 26 HAM projects awarded this fiscal, about four-five could get scrapped due to inability of the developer to invest equity or bring in debt, said an analyst, asking not to be named as he is not authorized to speak to reporters. Large banks such as State Bank of India (SBI) and Axis Bank are selectively funding HAM projects even as many companies continue to bid for and win such projects, according to this analyst. SBI and Axis Bank did not respond to email queries sent on Thursday. “Earlier, banks were slightly reluctant with funding hybrid annuity projects, especially for developers with weak balance sheets and lack of construction experience. They (banks) were taking longer time than usual to assess HAM projects as they wanted to understand the new business model. However, in the recent weeks, a lot of companies including Welspun, MEP Infra and Sadbhav have been able to achieve financial closure for their hybrid annuity projects,” said IIFL Wealth analyst Alok Deora. On 2 December, Deora had said in a report that certain small developers had failed to receive financial closure for their HAM projects, which were consequently cancelled. The government’s push for new low-risk HAM awards to kick-start private sector investments has led to the emergence of a number of smaller, regional companies that have added to the sector’s competitive intensity, according to road developers and analysts. The increase in awards of projects under the government-funded engineering, procurement, and construction (EPC) model too has driven up bidding aggression. Companies including Sadbhav Infrastructure Projects Ltd, Welspun Enterprises Ltd, and Ashoka Buildcon have been able to tie up loans and submit their financial closure details to NHAI. MEP Infrastructure Developers Ltd has been able to achieve financial closure for two of its projects with two others yet to be closed, while PNC Infratech Ltd and Dilip Buildcon Ltd are expecting to achieve financial closure by March. Some other companies such as MBL Infrastructures Ltd, APCO Infratech Pvt. Ltd, Oriental Structural Engineers Pvt. Ltd and GR Infraprojects Ltd, are yet to achieve financial closure of their won projects, according to channel checks of the firms. “A concern in the roads sector today is that there is huge aggression even though the number of players is less. The job being bid out are quite large, but theirs is no comfortable participation and instead, there is a lot of aggression. And that will lead to execution challenges,” Ashoka Buildcon’s Parakh said. Road projects in India have always been awarded in one of the three formats—BOT annuity, BOT toll and EPC. In BOT annuity, a developer builds a highway, operates it for a specified duration and transfers it to the government, which pays the developer annuity over the concession period. Under BOT toll, a concessionaire generates revenue from the toll levied on vehicles using a road. In EPC, the developer builds with government money. India has set a target to award 25,000km of road projects in FY17 under the ministry of road transport and highways and National Highway Authority of India (NHAI), compared to 10,000km achieved in FY16.