High oil bill: Government exhorts national companies to raise production
With Prime Minister Narendra Modi setting steep target of cutting reliance on imports, the Oil Ministry has intensified monitoring of oil and gas fields given to state-owned firms like ONGC to avoid slippages in domestic output. Modi, in March 2015, had called for cutting India’s dependence on imports to meet oil needs by 10 per cent by 2022, from 77 per cent then. However, India’s import dependence has since only risen to 81 per cent. “Most of our production of oil and gas come from nomination fields with ONGC and Oil India. We have now started monitoring those fields and have given new benchmarks to the national oil companies to increase production,” Oil Minister Dharmendra Pradhan said at an industry event. He said that oil recovery from reservoirs internationally is 35-40 per cent and that for gas is 55-70 per cent. In India, the current recovery factors of ONGC and Oil India for crude oil are as low as 27 per cent and 23 per cent. In case of natural gas, it is 54 per cent and 43 per cent for ONGC and Oil India, respectively,” he said. Pradhan said there is a need for introducing new thoughts, new technologies and remaining ahead of the curve. “I am told E&P sector should have major investment in ‘Internet of Things’. Digital oil fields, all infrastructure linked to the network, ability to monetise micro reserves are the new areas we need to look at,” he said. He cited the example of a marginal oil field in Vienna where sensors and small in-house innovations were used to reduce cost of production. “In contrast, in India, we have practices like having idle rigs and other assets; unscientific inventory and HR management; flaring of gas and remaining which are keeping us behind the technology curve,” he said. The minister called on investors to come and invest in oil and gas exploration and production under liberal fiscal policies like pricing and marketing freedom and minimal government interference in management of contracts. “The government has consciously tried to reduce administrative and regulatory roadblocks and to infuse new technologies. “Going forward, the government remains committed to making sustained and significant efforts to liberalise the sector by simplifying processes, increasing market access and bringing developments in the technology domain with the aim to enhance the efficiency of our oil and gas industry,” he said. Vic Beasley Womens Jersey
IndiGo makes formal offer to buy Air India’s international operations
BENGALURU, JUNE 29: The first official “interest” in acquiring national carrier Air India has come from the most unexpected source, the low-cost IndiGo. On the face of it, IndiGo and Air India are more like chalk and cheese. The former is an ultra low-cost airline while Air India, called the Maharaja, operates like one. In a notice to the BSE, IndiGo’s president Aditya Ghosh on Wednesday said he has written to the Civil Aviation Ministry expressing interest in buying the airline. “…Kindly treat this letter as our expression of interest in acquiring the international operations of Air India and Air India Express. Alternatively, we are interested in acquiring all the operations of Air India and Air India Express,” the letter said. According to the Ministry, this was the first “unsolicited” formal offer for Air India. There have been a few informal offers from both domestic and international airlines too, the Ministry said. An analyst with an international consultancy firm who did not wish to be quoted said Air India is a very valuable company in spite of all the criticism it faces. “Air India acquisition can help an airline become a very strong player. The network it brings to the table with a multitude of connections, hangars, slots, real estate… can play a key role for the airline to get a huge market share in the domestic as well as the international markets,” the analyst said. Buying the international operations would mean getting the Star Alliance tag on a platter and prime slots at airports such as Heathrow — and the Boeing Dreamliner fleet as well. Air India Express is another good buy because it is profitable too. Another airline analyst, Devesh Aggarwal, said there is very little synergy between the IndiGo and Air India. Given the ?52,000-croremountain of debt weighing it down, the government could sell off the three profitable subsidiaries of the airline which will considerably reduce the total debt, the analyst added. For IndiGo, which commands a 41 per cent market share, acquiring Air India will increase its share to over 50 per cent. But the analyst said that it remains to be seen how the airline will raise funds to make this acquisition as the carrier has placed huge orders for aircraft, including 50 ATRs worth $1.3 billion recently. Ian Thomas Authentic Jersey
IATA flags information gaps, seeks clarification on GST
Global airlines body International Air Transport Association (IATA) today sought clarifications on the tax treatment of air travels under Goods and Services Tax (GST) and claimed that there were “information gaps” regarding the implementation of the new tax regime. The aviation ministry, too, had earlier sought postponement of the GST implementation by two months on the ground that airlines needed more time to revamp their systems to comply with the new tax regime. In a u-turn, the ministry later said it was prepared for the GST roll out from the stipulated date — July 1. “There are still information gaps. We look forward to receiving the guidance notes to be provided by the GST Council,” said Country Director-India of the IATA Amitabh Khosla in a press statement. The body has sought clarification on “taxation treatment of continuous journeys” as the new taxation system is likely to make non-stop flights more expensive than stop-over flights. It has also expressed concerns about levying of the GST on air cargo. “We believe that the levying of GST on cargo export services by air contradicts standard GST principles as well as the treatment of such services under the service tax regime. Clarification would help align this with international standards and principles,” the statement added. Carriers, including Air India, have expressed concern over certain aspects of GST. Airline officials said making changes in the global ticket distribution system to ensure compliance with GST would take time. Airlines are also in a fix over the possibility of movement of stocks or equipment or aircraft parts being taxed under GST. Another sticking point is that input tax credit is only available for business class travel and not for economy class travel — a segment where there are more number of passengers.This would result in spike in operational costs for airlines. Input tax credit allows an entity to deduct the levies paid for the inputs while paying the taxes on the final output. Since GST is applicable for goods as well as services, input tax credit provides a leeway for the entities concerned. Shawn Williams Jersey
National no-fly list: Aviation ministry meeting inconclusive, no consensus on bringing crew, ground staff under ambit
A meeting on Wednesday on a national no-fly list for unruly passengers was inconclusive as top officials of the ministry of civil aviation debated whether airline crew and ground staff should also be covered in the list. A framework for a no-fly list for unruly passengers is in the last stages of being finalised and a top official had said that the rules would be made public in the first week of July. The government had last month made its draft rules on no-fly list public and invited stakeholders’ comments. As part of this exercise several people wrote to the ministry calling the proposed rules “lopsided” and demanded airlines should also be held equally accountable for misbehaviour of their crew. But the meeting today to finalise the rules failed to draw a consensus on expanding the scope of the national-no fly list and to apply it to the airline crew and ground staff as well, said a ministry official. Brett Kulak Authentic Jersey
Debt biggest challenge for Air India’s disinvestment
The Group of Ministers headed by Finance Minster Arun Jaitley will take a call on key issues that will make debt-laden Air India’s stake sale to private players more attractive. The Ministerial group will consider hiving off Air India’s assets and a portion of its non-aircraft debt to a special purpose vehicle (SPV) as a first step toward clearing up its balance sheet. “The Civil Aviation Ministry had proposed forming a SPV housing a substantial portion of its working capital loan and assets,” a senior ministry official said, on the condition of anonymity. “The sale of Air India’s prime real estate assets will help in meeting its liabilities,” the source said. Air India has a total debt of around ?52,000 crore which comprises of ?22,000 crore as aircraft loan and the rest as working capital loan and other liabilities. Some of its prime real estate properties include a building at Nariman Point and another at the old airport in Santa Cruz in Mumbai, freehold land in Chennai’s Anna Salai, an office in Baba Kharak Singh Marg in Connaught Place in New Delhi and freehold land and buildings in Hyderabad. However, the airline has mortgaged some of these as security with banks for availing loans. The Government may also separately go for strategic disinvestment of Air India’s three profit-making subsidiaries: its MRO unit Air India Engineering Services Limited, ground handling arm Air India Transport Services Limited and Air India Charters Limited. Brian O’Neill Womens Jersey