Budget 2017: Government may accord infrastructure status to low-cost housing
The government may tweak the definition of the infrastructure sector in the upcoming budget to include low-cost or affordable housing, a move that would reduce costs for developers and attract investors, two people with the knowledge of the matter told ET. The change is being proposed about a month after Prime Minister Narendra Modi announced concessions on interest rates for low-cost housing loans under the Pradhan Mantri Aawas Yojana. “If we want housing for all by 2020, re-categorising affordable housing as infrastructure is essential. The government had sought feedback about this about a week ago,” a person familiar with the development said. “I see this happening in the upcoming budget.” The government has been pushing Modi’s pet project of providing about 20 million houses across India by 2020. IT has reached out to senior finance ministry officials and the Reserve Bank of India for feedback on the proposed change and how to prevent it from being misused. “The important thing here would be to define affordable housing or low-cost housing. And these projects will have to be insulated in a way that no one is able to take money out without completion of the project,” another person aware of the development said. Real estate developers have been under stress as they have borrowed funds at a higher cost. In addition, banks are reluctant to lend money to the sector and the situation worsened after the November 8 announcement scrapping high-denomination currency notes, leading to a fall in real estate sales. “If affordable housing is given infrastructure status, it would lower the borrowing cost for the developers. Also, regulations should be simplified to directly borrow foreign debt, which can cost around 4-5% on dollar return,” said Hemal Mehta, a partner at Deloitte Haskins & Sells. Industry experts said that while it may appear to be a small change, categorising low-cost housing as infrastructure could have far-reaching results. “Real estate industry has been asking for the infrastructure status for affordable housing for last three years, but this time it is only logical that it could go ahead. This is mainly because the prime minister has announced the new scheme and infrastructure status will help reduce the borrowing cost and help accelerate growth,” said Jeenendra Bhandari, partner at MGB and Co, an audit and tax firm. The government’s focus is on affordable housing in the rural areas and there could be additional tweaks in this aspect in the budget. Emailed queries sent to finance ministry officials, the Central Board of Direct Taxes and the RBI did not elicit any response. Regulations will have to be changed so that low-cost housing projects do not attract adverse taxes but easier project finance even from investors outside India, the people in the know said. Industry experts said a change in status, along with clear guidelines, could mean low-cost housing could attract investment from foreign pension funds and insurance companies. “These projects could have a dollar-denominated debt and offer a return of 4-5%. This would work well for both domestic developers as well as foreign investors,” an expert said. As per the recommendations, the government can look at allowing tax-free returns to foreign investors that invest in low-cost housing. This could solve some of the funding issues the sector is facing. Andreas Athanasiou Womens Jersey
NHAI to seek nod from traffic police before expanding Delhi-Gurgaon Expressway underpass work
National Highway Authority of India (NHAI) will have to keep the district traffic police in loop before expanding the construction work of three underpasses on Delhi-Gurgaon expressway and a flyover on old Delhi-Gurgaon Road. In fact, improvements have been suggested in the NHAI’s construction plan so there is least congestion on roads and commuters do not face any discomfort. A meeting was held between senior police officers, road safety officers (RSO) and NHAI officials earlier this week. Following which a joint inspection was conducted by traffic cops, RSOs and NHAI on Friday. Sources told TOI that the team found over two dozen flaws in the NHAI’s three-phase construction plan for the building underpasses at Rajiv Chowk, Signature Tower and IFFCO Chowk, while, a flyover will be constructed on Old Delhi-Gurgaon Road. These flaws were identified on the basis of the snarls they could cause, or even didn’t offer a carriageway for the vehicles to cross while the construction work was on. For instance, the Rajiv Chowk was often being choked in past couple of weeks due to the NHAI’s construction work. “During inspection it was noticed that the highway authority is also supposed to widen the road in addition to constructing the underpass. They could have first widen the road so vehicles had a carriageway to move on and would have taken internal lanes to construct the underpass. But instead they took over the main road instead and as a result there is now a bottleneck at the stretch and commuters are facing the difficulties,” said Rajive Nandwani, a road safety officer. In fact, a water pipeline burst near Rajiv Chowk earlier this week, led to choking of the junction. Similarly at Maharana Pratap Chowk, the construction work has narrowed down the road space which is leading to snarls. The remaining lanes, including the one coming from bus stand are badly damaged and have potholes which makes it difficult to drive over it. Following this, NHAI has been asked to take a nod from the traffic police before expanding to any other parts of the road near these underpasses. “We have suggested them some improvements in their construction plan so there is always room on the road for vehicles to move. The joint team inspection will be done whenever they would want to expand the area under construction because once the area is dug up, nothing can be done till it is filled,” said Sibash Kabiraj, joint commissioner of police. “For now we have asked them to give road users some space near the statue at Maharana Pratap Chowk and widen the old Mehrauli-Gurgaon Road. There is some construction material lying on the slip road coming from Signature Tower towards this crossroad which will be removed by the end of coming week,” adds JCP Kabiraj. Valeri Nichushkin Authentic Jersey
Roads and renewables infrastructure deals seen rising in 2017
Deals in the infrastructure space are set to increase as companies put dozens of assets across roads and renewable energy sectors on sale, according to analysts and investment bankers. A number of such deals have either been announced or are in the due-diligence stage and will likely be completed in 2017. A number of infrastructure-focused funds and overseas pension funds have announced plans to invest in India’s roads and renewable energy projects. “Within infrastructure, roads is a sector where one will see deal activity improving, primarily because there are multiple operating assets available for a transaction that do not have construction risks involved and thus have better appeal to a financial investor. Also, there are multiple buying platforms emerging apart from the existing road platforms, as financial investors will also become acquirers of road assets via structures such as InvITs (infrastructure investment trusts). It is now a question of buyers’ and sellers’ expectations meeting at a certain valuation benchmark,” said Navneet Singh, executive director and head, infrastructure group, Avendus Capital. Also, while deals in the thermal energy sector are expected to remain subdued due to the presence of only a handful of buyers, predominantly looking for operating assets, “the renewable sector, primarily solar, will see activity in fund-raising as companies will continue to need additional capital to build their projects,” Singh added. Several Indian infrastructure developers, weighed down by debt, have announced exits from individual highway projects to monetize assets and repay creditors while renewable energy firms evaluate fund-raises and going public. The infrastructure sector raised about $3.78 billion in 2016 across 36 transactions, including mergers and acquisitions (M&A), private equity (PE) investment and two initial public offerings (IPOs), analysis of monthly data from investment bank Equirus Capital Pvt. Ltd showed. This compares with $2.9 billion raised in 2014 and about $3.7 billion raised in 2015. According to data from Grant Thornton India, about $2.91 billion was raised from 39 M&A and PE transactions in 2016 across engineering, infrastructure, and clean-tech sectors. Funds such as US-based I Squared Capital, Indian asset manager IDFC Alternatives’ infrastructure fund, Canada’s Brookfield Asset Management, Australia’s Macquarie Group, and the Canadian pension funds Canada Pension Plan Investment Board (CPPIB) and Caisse de Depot et Placement du Quebec (CDPQ) have committed large investments in the sector and are looking to buy assets across roads, thermal power and renewable energy to build their own portfolio in India. CDPQ, for example, had last year committed investments of $150 million for renewable energy in India and also joined hands with Tata Power Co. Ltd and ICICI Venture to launch a platform to facilitate investments in power projects with an initial capital of up to $850 million. Infrastructure Fund II of multi-asset manager IDFC Alternatives, for example, plans to buy certain operational road assets by March. “A number of deals in the sector have been signed or announced over the last 12 months but many are yet to close. One noticeable trend seen is that closing and funding control acquisitions require significantly higher involvement and patience than buying simple passive minority stakes,” said Aditya Aggarwal, partner (infrastructure) at IDFC Alternatives. “Going forward, I would expect a lot more mid-sized M&A activity in renewables given that significant solar capacity would get commissioned from the equity lock-in restrictions in 2017. Likewise, I expect the TOT (toll-operate-transfer) model to be a game changer in road sector investments this year,” Aggarwal said. The government is looking to monetize 75 national highways operated by the National Highways Authority of India (NHAI) through international competitive bidding under the so-called TOT model, where investors including foreign funds will participate. Similarly, road developers including Sadbhav Infrastructure Projects Ltd and Gayatri Projects Ltd are looking for buyers for some of their operational assets. Hyderabad-based Gayatri Projects is carrying out the process of demerging its roads assets into a separate entity to bring in a financial partner or look at selling the portfolio either entirely or as individual assets to foreign funds, managing director T.V. Sandeep Kumar Reddy said. He expects the demerger process to be over by end of March. Among upcoming deals this year is Larsen and Toubro Ltd’s (L&T) plan to transfer its build, operate, transfer (BOT) assets to Canadian pension fund CPPIB by March. A number of companies including IRB Infrastructure Developers Ltd, Sterlite Power Grid Ventures Ltd, IL&FS Transportation Networks Ltd, GMR Infrastructure Ltd and MEP Infrastructure Developers Ltd are gearing up to raise money and cut debt via the InvIT route. InvITs are trusts which manage income-generating infrastructure assets, typically offering investors regular yield and a liquid method of investing in infrastructure projects. Josh Rosen Authentic Jersey
Ramp up copter production, Defence Ministry tells HAL
With the armed forces projecting the need for some 700 helicopters — light utility and armed — the Defence Ministry (MoD) has asked the public sector giant Hindustan Aeronautics Limited (HAL) to ramp up production, speed up existing under-development projects and start out-sourcing work. The HAL, headquartered at Bengaluru, produces some 22-24 advanced light helicopters (ALH), the Dhruv, annually and some 200 of these are flying; however, the requirement is huge. In the second phase, rapid production of light utility helicopters (LUH) and light combat helicopter (LCH) will start. Prototypes of both are ready but need operational clearance. The MoD wants HAL to produce up to 85-90 copters per annum of these three types – the Dhruv, LUH and LCH — said sources, while adding that out-sourcing of some work had been suggested on the lines of global manufacturing practices. Andre Johnson Jersey
CBI case a ‘shock’; will hit Air India hard, says Ashwani Lohani
With CBI registering a case related to software procurement at Air India, airline chief Ashwani Lohani today termed it as a “shock” saying the omnipresent shadow of vigilance and other probe agencies over processes undertaken by the executive has caused maximum damage to the public sector. The case has come as a shock because ostensibly as per the stand taken by the company as well as its parent ministry, there may be procedural lacunae but “there is no apparent malafide in this case”, he said. While observing that “perhaps there is more to it than meets the eye,” Lohani in a strongly-worded blog also said regardless of the issue, such an investigation is bound to hit the company hard. Besides, there is the pain of digging out old papers, questioning of many including the innocent and the honest and its attendant ramifications, he noted. CBI has registered a case against unknown officials of Air India, German firm SAP AG and IT major IBM in connection with alleged irregularities in procurement of software worth Rs 225 crore by the national carrier in 2011. “Air India that has been a victim of gross indecision in recent years and only lately had started to come out of its slumber will also take a hit, I am absolutely certain, as an outcome of the unfortunate turn that this case has now taken,” he said. In the blog titled ‘Pinning the executive down Those who idle shall commit no mistakes!’, Lohani said he was unable to appreciate the basic premise that a non-executive is required to keep an eye on every single aspect of working of the executive. “… that we should have checks and balances that are highly tilted in favour of the checks,” he added. Lohani, who took over as Chairman and Managing Director of Air India more than a year ago, has been steering efforts to revive the fortunes of the national carrier. Known for speaking his heart, the Air India chief said the case would further strengthen the belief that following processes is important and deliverance can take a back seat. “The omnipresent shadow of vigilance and other more powerful investigative agencies over the minutest processes undertaken by the executive is one single factor that has caused the maximum damage to the public sector in our nation,” he noted. Air India is surviving on a Rs 30,000 crore bailout package for a ten-year period which was extended by the previous UPA government. Ryan Kesler Jersey
44 airports have potential for operations under UDAN: Report
About 44 airports across the country have “high potential” for operations under the ambitious Regional Connectivity Scheme (RCS) for civil aviation, UDAN, according to a report brought out by apex industry body FICCI has said. “Based on the geographical, operational and commercial parameters, 44 out of the 414 underserved and unserved airports have high potential under RCS. “We have also identified around 370 potential destinations for the shortlisted airports, including metros, state capitals and important commercial, industrial and tourism centres,” said the FICCI report, brought out in concert with global professional service company KPMG. Uttar Pradesh has four high potential RCS destinations, three each in Maharashtra, Rajasthan, West Bengal, Assam, two each in Arunachal Pradesh, Meghalaya, Bihar, Karnataka, Himachal Pradesh, Gujarat, Chhattisgarh and one each in Andhra Pradesh, Telangana, Tamil Nadu, Odisha, J&K, Puducherry, Lakshadweep, Daman and Diu, Haryana, Madhya Pradesh Jharkhand and Uttarakhand. “So far 22 states have joined the RCS and we have identified 30 airports where operations could be started immediately,” Union Civil Aviation Secretary Rajiv Nayan Choubey told PTI. RCS, or UDAN ((Ude Desh Ka Aam Naagrik), was introduced as part of the National Civil Aviation Policy 2016 and was formally launched in October last. It provides an opportunity to take flying to the masses by way of fiscal incentives, infrastructure support and monetary subsidies (viability gap funding). Noting that RCS was a good scheme, Regional Director of International Civil Aviation Organisation Arun Mishra, however, said India did not have the wherewithal right now for RCS to become successful. “They are trying to build the wherewithal but it will take some time,” he said. “We have to be careful about creating the enabling conditions for this scheme to become successful. One of the most important things is the right size of aircraft that you need.” He said a plan was required to induct smaller aircraft for RCS operations. “Many of the airports (identified for RCS) do not have big runways, so they can’t take regular aircraft. We need to induct smaller aircraft for short runways for short takeoffs and landings. “Those aircraft are not available in our country,” Mishra, who earlier served as Director General of Civil Aviation, pointed out. Also, Mishra said, there was shortage of pilots and crew. “Small aircraft need specialised crew. We need a special initiative from the government to build that up. Pilots and engineers can’t come overnight. We need to train them,” he added. “India produced only about 200-300 pilots every year. “The Civil Aviation University in China has 2000 trainers. It has 265 aircraft for training purposes,” the ICAO official pointed out. Observing that aviation created high value jobs and has multiplier economic effect, Mishra said “one aircraft that comes to the country, creates 600 jobs, directly and indirectly. These were not regular jobs that paid Rs 5,000 or Rs 10,000 a month but those that paid Rs 50,000 or Rs 60,000.” “Essentially, necessary infrastructure needs to be created for RCS to become successful. Airports Authority of India has readied 55 airports and there they can start the RCS,” Mishra added. Meanwhile, the FICCI report suggested that Viability Gap Funding under RCS be extended from the proposed three to five years or more as these airfields might taken even longer to become financially sustainable. RCS operators should also be allowed to use pilots, cabin and maintenance crew of other airlines and allow foreign registered aircraft for operations. Nolan Ryan Jersey
Govt to spend Rs. 16k cr in the next 5 yrs on airport infrastructure
The government is now working on a national level plan to make unused airstrips operational again, which will offer easy air connectivity to the people who are living in far-flung areas of the country. For this, the government will be spending Rs.16,000 crore in the next five years to upgrade the airport infrastructure, said Civil Aviation Secretary R. N. Choubey on Friday. Choubey was speaking at the Aviation Summit 2017, jointly organised by Ministry of Civil Aviation, government of Andhra Pradesh and Federation of Indian Chambers of Commerce and Industry (FICCI) in Vijaywada city of Andhra Pradesh. “We want to increase the number of air passengers to such a level that in the next five to seven years, India will become the third largest aviation market in the world. That’s the kind of market which is available here,” he said. Under the regional connectivity scheme, the government is providing 50-60% viability gap funding to airlines that connect unconnected airports, he added. Choubey informed that this is the first time that the civil aviation sector has achieved parity with the railways. “Civil aviation sector in India has achieved annual turnover of Rs. 1.4 lakh crore as compared to Rs. 1.6 lakh crore of Indian railways, he said. “Our airfare is comparable now with the fares of AC trains. Civil aviation was perceived in India as a mode of transport for only the rich. But now the change in perception among people as well as policy is happening,” he added. Gareon Conley Authentic Jersey
SpiceJet’s mega order: Indian aviation market set to surpass Japan, become 3rd largest
SpiceJet today announced an order for 100 new Boeing 737 Max aircraft for $11 billion at list prices, the second highest aircraft order ever from India. Combined with an earlier order, this means it will receive 155 narrow body jets between 2018 and 2024, besides also having purchase rights for 50 more wide body aircraft from the same manufacturer. The narrow bodies will be used to service the domestic market as well as select international destinations. The wide body fleet of 50 Boeings – when SpiceJet does firm up the order for it – will enable the airline to launch a long haul low cost service like Singapore Airlines’ subsidiary Scoot and Norwegian Air. Anyhow, the new aircraft are 8 percent more economical on a per seat basis and about 20 percent better in fuel efficiency. Chairman and MD Ajay Singh said today the new aircraft will allow the airline to fly for an hour longer, which means new international destinations will anyway be added to its network. As of now, one in four SpiceJet flights or 25 percent of the network flies to international destinations, with 10 daily services to Dubai alone. So why is SpiceJet going out on a limb to place a mega aircraft order which will require mega bucks? Singh said today that the domestic market has been growing at about 25 percent in recent years. “Indian airlines together have about 400 aircraft now, even if we take growth at 20 percent going forward, this means 80 more aircraft are needed each year….as the market grows, appetite for fleet expansion also increases.” Kyzir White Jersey
J&K:Huge power deficit
Will there be a day when we in J&K shall have the luxury of supply of electric power without interruption round the clock and of reasonably good voltage. The answer is mystifying. State’s power deficiency and erratic supply have become proverbial. The Finance Minister in his power budget speech said that investment in various power generating projects has become like water over duck back. There is no death of mind boggling figures brought out by power authorities including the Minister in charge of power pertaining to financial investments made in major as well as minor power projects in the State. One can name at least a dozen of them in line. However, no official in the hierarchal structure of PDD is able to pronounce the time frame of these projects. The only reason given by the Power Department for a big gap between supply and consumption is that either there is pilferage on very wide scale or there is transmission problem. Singing the tune of his predecessors, Dr, Nirmal Singh, the Deputy Chief Minister and In-charge of Power Department, exuded the dream of the State having large scale water resources capable of producing 20,000 MW of hydroelectric power which would not only meet our 24×7 requirement but we would also be left with surplus to sell to other states. It is a soothing dream and there is hardly a person who is not swayed by imaginary prosperity that is going to befall our people in the State. The reality is that we have been able to harness only 3263 Mega Watt till date. This is barely one-sixth of production that we enjoy. We vainly wish that our State so rich in water resources could have the good luck of making this vast resource useful to our people. If previous regimes have not been able to make any headway in this direction, the PDP-BJP coalition, too, has not fared better. We know that this time FM presented separate power budget in the Legislative Assembly and follow up action is promised, yet the bare fact is that he, too, has not been forthcoming on the question of time frame for each project. There may be cogent reasons for not disclosing the time frame but it is this component that is dearer to ordinary consumer. Though he made mention about the plans of tapping 8917 Mega Watts in future by JKSPDC, NHPC, Chenab Valley Power Projects Ltd (CVPPL), which is a joint venture between JKSPDC, NHPC and PTC, in the ratio of 49:49:2, yet he failed to specify any time-frame for the same. He simply mentioned that under State Sector 23 projects with the capacity of 3867 Mega Watts will be constructed and under Joint Venture mode, four projects with the installed capacity of 2714 Mega Watts will be constructed. Similarly, he informed the House that 2 projects with capacity of 1130 Mega Watts, one project with 850 Mega Watts and 34 small projects with installed capacity of 356 Mega Watts have been planned to be constructed. The Deputy Prime Minister, Dr, Nirmal Singh expressed hope that the day was not far away when the State would become self sufficient in power because, as he said, big and small projects for gendering units were in the process of completion. It is true that many projects are in the process the point is when would these be available for use. Indefinite delay dampens the spirit and escalates construction cost. PDD’s lethargic in regard to harnessing solar power, too, has biome a joke of the day. The Minister In-charge Power also admitted failure of the Government to tap solar power potential, which has been assessed at 111 GW by the National Institute of Solar Energy. Inability of the Government to avail benefit of available solar power was exclusively highlighted by EXCELSIOR in its edition dated December 17, 2016. Great media hype was given to Leh as having considerable potential for the use of solar energy but when the cost of generating solar power was found to be exorbitant, the plan was put in cold store. Now, according to the statement of the Minister given on the floor of the House, the State PDD is approaching the Union Ministry of Renewable Energy for support in production of solar power in the State. The hard fact is that harnessing of solar energy in our State seems to be a distant dream and that is not going to give the people any consolation. The Minister has no alternative but to impress upon the PDD that expediting power generation capacity is the only and most important activity that must be pursued and brought to its logical conclusion. Derrick Henry Authentic Jersey
Odhisa:State Govt forced to buy costly central sector power
Even after repeated request to deallocate its share of power from NTPC’s Barh Super Thermal Power Station in Bihar, the cash-starved Grid Corporation of Odisha Limited (Gridco) is forced to buy costly power from central sector. While the average cost of power from the central thermal power stations (Odisha’s share) is estimated at Rs 4.38 per unit, power from Barh STPS-II will cost Rs 6.36 per unit. Tariff of central generating power stations are fixed by the Central Electricity Regulatory Commission (CERC). With the state’s share of 14.79 percent from the two units of Barh-II with an installed capacity of 1320 MW (2X660MW), Gridco will draw 1105.83 million unit (with central sector loss of 1.98 percent) during 2017-18. The total cost of power has been estimated at Rs 704.30 crore. The state government has been requesting the Ministry of Power (MoP) from 2012 for de-allocation of power from NTPC stations outside the Odisha including the Barh-II STPS. The MoP notified on August 31, 2015 for surrendering of the allocated power by different States including Odisha and sought willingness from other States to avail such surrendered power. “The proposed de-allocation in favour of Odisha is yet to take effect as no alternative buyer has offered willingness to purchase the power from Barh-II. Power from the NTPC plan is being thrust upon Gridio in spite of any requisition from Gridco to draw power from the two units,” sources in Gridco said. The state trading utility Gridco has projected the energy availability from Barh STPS-II of NTPC as per the share allocation in favour of Odisha in its annual revenue requirement (ARR) application for 2017-18 financial year. This is bound to increase the power tariff in the state as Gridco will pass on the high tariff to consumers, the sources said. Earlier, the Ministry of Power had de-allocated 155 MW from New Nabinagar STPP in Bihar last year following request from the State Government. The state’s share has been asllocated to Uttar Pradesh. Gridco has projected power procurement of 7371.37 million unit at estimated cost of Rs 3227.39 crore from central sector thermal generating station for the ensuing financial year.