Air India’s aircraft sit idle because it can’t pay for spares and repair
Despite many attractions such as lucrative international routes and prime time slots, Air India has yet to find a suitor after the civil aviation ministry came out with the preliminary information memorandum on Air India’s strategic disinvestment on March 28. Air India’s mountain of debt, besides many other issues, discourages buyers. The debt stands at Rs 48,876 crore. India’s national airline is also being bled by a cash deficit. The civil aviation ministry has admitted that several of its aircraft are idling because Air India is unable to purchase all the spares it needs thanks to a monthly cash deficit of Rs 200-250 crore that affects the availability of funds for maintenance, according to a TOI report. The ministry has told Parliament’s Public Accounts Committee (PAC) that a restricted cash flow was responsible for inoperational aircraft despite a turnaround plan (TAP) being in force since 2011 while fleet expansion had been hit by viability issues and an ongoing CBI probe into previous acquisitions. On March 28, the ministry came out with the preliminary information memorandum on Air India’s strategic sale. It has sought expressions of interest from potential bidders for a 76-percent stake sale in loss-making Air India as well as divestment of Air India Express and AI-SATS. The last date for submission of expression of Interest is May 14. The qualified bidder will be informed on May 28. A number of airlines have refused to come forward due to discouraging terms of sale. “There is a cash deficit of Rs 200 crore to Rs 250 crore every month which affects the availability of funds for procurement of spares,” the ministry told the PAC even as it said that “every attempt” was being made to devote maximum financial resources to the availability of spares to improve utilization of aircraft. It needed $300 million accessed through external commercial borrowings to liquidate outstanding dues of foreign suppliers in 2015 to improve the situation as maintenance expenditure soaked up Rs 2,500 crore or 12% of the debt-laden airline’s operating expenditure. The ministry told the PAC that aircraft engines earlier sent abroad for overhaul and repair were being maintained domestically. “AI is also in constant dialogue with its suppliers to remove the credit hold in order to maintain a smooth supply of spares for sustained and uninterrupted operations,” it said. The ministry also stated that aircraft acquired on lease were grounded for around two months at the time of redelivery as a number of conditions had to be satisfied. With a total debt totaling Rs 48,876 crore (government-guaranteed Rs 25,388 crore and non-GOI guaranteed Rs 23,488 crore) AI’s cash situation remains perilous despite improvements in operating profits. AI’s debt remains high as a key assumption or objective of the TAP — accumulation of Rs 5,000 crore by way of monetization of properties — has not happened. As against Rs 500 crore being monetized every year, AI has managed only Rs 725 crore till date and reason is “defective title deeds” and a bar by the ministry of urban development on a sale of property given the airline on “perpetual lease”. Though AI’s turnover has been increasing, and the TAP and financial reconstruction plan have helped improve on-time performance, load factor, aircraft utilization, hiving off non-core assets and gaining equity support, cash losses remain high despite a declining trend. Also, plans to offer a VRS (voluntary retirement scheme) to employees was dropped as it was found to be financially unviable. Cam Atkinson Womens Jersey
Average price of US gas jumps 9 cents, to $2.83 a gallon
The average U.S. price of regular-grade gasoline spiked 9 cents a gallon over the past two weeks to $2.83. Industry analyst Trilby Lundberg said Sunday that the jump was driven primarily by rising crude oil costs. The current gas price is 37 cents above where it was a year ago. The highest average price in the contiguous 48 states was $3.68 in the San Francisco Bay area. The lowest was $2.45 in Baton Rouge, Louisiana. The average price for diesel fuel rose six cents, to $3.10. Tyreek Hill Authentic Jersey
Panama Canal to carry 30 mln T of LNG by 2020 as global demand grows
The Panama Canal may carry five times as much liquefied natural gas (LNG) in 2020 as it did last year as production of the fuel expands in the United States and Asian import demand rises, the head of the canal’s governing agency told Reuters. LNG volumes traversing the Canal could hit 30 million tonnes a year before the end of 2020, said Jorge Quijano, who leads the Panama Canal Authority, up from 6 million tonnes last year. Demand for LNG has risen significantly in the last three years as the increase of supply, especially from onshore shale fields in the United States and offshore reserves in Australia, has made it more competitive. Many countries including China have also been switching to gas more rapidly than expected, away from dirtier coal, for environmental reasons. The United States has only one LNG export facility, at Sabine Pass in Louisiana, which exports via the Panama Canal mostly to North Asia and the Pacific coast of Latin America. But shipments are expected to surge over the next few years as several U.S. LNG projects are under construction, with total U.S. capacity slated to reach nearly 70 million tonnes a year, up from 18 million tonnes in 2017. “Right now on average, we’re running six (LNG) vessels per week, but in the very near future, you will have several plants exporting and that starts to add up,” Quijano said in an interview with Reuters on Thursday. U.S. LNG exports through the canal are set to rise to as much as 11 million tonnes this year and to around 20 million tonnes in 2019, he said. Reflecting a quickening in traffic, three gas tankers transited the Canal in a single day for the first time on April 17. And since June 2017, there have been 15 days in which two LNG ships passed through the Canal in a 24-hour period. Shipments of LNG through the Panama Canal began to rise after a third set of locks was added in 2016, Quijano said, and the authority projects growing demand for the supercooled fuel will boost such transits through the early part of the 2020s. The Canal is already looking beyond the next few years to adding a fourth set of locks, which would serve a new generation of even bigger ships, Quijano said. Oscar Lindberg Jersey
ONGC targets onshore dollars
India’s biggest oil explorer Oil and Natural Gas Corp is looking to raise US$1bn in the onshore market, in the first big deal to target foreign-currency deposits with domestic lenders. The one-year loan would set a benchmark for size and pricing in the onshore US dollar market, where financings typically come in small sizes of US$30m-$50m. It also offers Indian banks a rare opportunity to invest in one of the country’s top borrowers, since ONGC typically funds in dollars to match its cash flows. Foreign currency non-resident (FNCR) accounts are fixed deposits in foreign currencies, such as US, Canadian and Australian dollars, yen, euros and pounds sterling belonging to non-resident Indians (NRI) or persons of Indian origin (PIO). According to the Reserve Bank of India’s website, outstanding FCNR deposits as of February this year totaled US$21.84bn. ONGC’s pursuit of the FCNR liquidity comes at a time when Indian banks are wrestling with non-performing loans in an environment of risk aversion, declining business opportunities, and corporate governance issues. “Indian banks are smarting from the recent developments around fraud and corporate governance issues that add to their NPL woes. ONGC’s deal brings a great opportunity to lend to one of the best credits from India,” said a senior loans banker in Singapore. In mid-March, India’s central bank barred all lenders from issuing letters of an undertaking – a form of credit guarantee at the centre of what has been dubbed the biggest fraud in Indian banking history. It followed revelations from Punjab National Bank, the country’s second-biggest state-owned lender, which said in February two jewelry groups had defrauded it of about US$2bn. Earlier this month, rating agencies S&P and Fitch flagged the need to improve risk management and governance practices at Indian private-sector banks. Regulators have opened preliminary probes into possible corporate governance breaches at ICICI Bank, while Axis Bank said on April 9 that its long-serving CEO Shikha Sharma would step down at the end of 2018, earlier than expected. LAP IT UP Indian lenders, particularly state-owned banks, have compelling reasons to lap up ONGC’s FCNR loan. Exposure to ONGC, which has Triple A ratings domestically, carries only a 20% risk weighting and comes with rarity value as the company hardly borrows onshore. Furthermore, following the recent developments, Indian banks have turned cautious on lending in general and opportunities have been few and far between for them offshore. Tata Steel’s US$1.86bn-equivalent six-year refinancing launched earlier this month is a good example of their hunger for good quality assets with decent yields. The offshore deal has seven Indian banks in its 23-strong arranger group, including unusual names such as Export-Import Bank of India and RBL Bank. Exim India has previously participated in offshore loans for Indian credits, while RBL is making its debut as an arranger. Tata Steel, rated Ba3/BB-/BB, is offering top-level all-in pricing of 218bp and 210bp based on interest margins of 200bp over Libor/Euribor and average lives of five years. Pricing in the offshore loan markets for top-tier Indian credits has been on a downward trend for a long time, which ONGC’s overseas arm, ONGC Videsh, has taken advantage of frequently. In August, the wholly-owned subsidiary, rated Baa1/BBB? (Moody’s/S&P), raised US$843m-equivalent, paying top-level all-in pricing of 102bp on the five-year US dollar portion and 62bp on the seven-year yen piece. ONGC itself could borrow at extremely tight levels offshore, with some bankers estimating a five-year loan to pay around 50bp-60bp all-in. However, rules governing external commercial borrowings for Indian borrowers stipulate the use of proceeds, minimum average maturities and all-in pricing caps on the offshore loans. FCNR loans do not have any of these requirements. FCNR DYNAMICS Bankers familiar with the workings of the FCNR loan market said financings are mostly bilateral in nature with short tenors of less than three years. Pricing is 250bp-300bp over Libor or higher with the facilities featuring reset options for Libor as well as the interest margin. “The fragmented, volatile and erratic nature of the FCNR deposits makes it hard to get a handle on the size of the market. FCNR deposits have never been a big force of liquidity and never in a syndicated format,” said one senior loan banker in Mumbai. ONGC is raising the FCNR loan to partially refinance bilateral facilities from Indian banks totaling Rs180.6bn (US$2.84bn) signed in January that helped fund its Rs369.15bn purchase of the government’s 51.1% stake in HPCL, a downstream energy company. ONGC is averse to raising rupee bonds because it earns its revenues in foreign currency. But should it decide to take that route, bankers said it could easily raise longer-tenor money at around 8.00%-8.50%. However, that would be far more expensive than the FCNR loan, which also provides a natural hedge for the company. Nate Allen Jersey
Petrol price hits highest level under BJP govt, diesel at record peak
Petrol price today hit Rs 74.40 a litre – the highest level under the BJP-led government, while diesel rates touched a record high of Rs 65.65, renewing calls for a cut in excise duty to ease the burden on consumers. State-owned oil firms, which have been since June last year revising auto fuel prices daily, today raised petrol and diesel rates by 19 paise per litre each in Delhi, according to a price notification. The hike necessitated due to firming international oil prices, comes on back of a 13 paise increase in rates of petrol effected yesterday and a 15 paise hike in diesel, it said. Petrol in the national capital now costs Rs 74.40 a litre, the highest since September 14, 2013, when rates had hit Rs 76.06. Diesel price at Rs 65.65 is the highest ever. Oil ministry had earlier this year sought a reduction in excise duty on petrol an diesel to cushion the impact rising international oil rates but Finance Minister Arun Jaitley, in his Budget presented on February 1, ignored those calls. India has the highest retail prices of petrol and diesel among South Asian nations as taxes account for half of the pump rates. Jaitley had raised excise duty nine times between November 2014 and January 2016 to shore up finances as global oil prices fell, but then cut the tax just once in October last year by Rs 2 a litre. Subsequent to that excise duty reduction, the Centre had asked states to also lower VAT, but just four of them – Maharashtra, Gujarat, Madhya Pradesh and Himachal Pradesh – reduced rates while others including BJP-ruled ones ignored the call. The central government had cut excise duty by Rs 2 per litre in October 2017, when petrol price reached Rs 70.88 per litre in Delhi and diesel Rs. 59.14. Because of the reduction in excise duty, diesel prices had on October 4, 2017, come down to Rs 56.89 per litre and petrol to Rs 68.38 per litre. However, a global rally in crude prices pushed domestic fuel prices far higher than those levels. The October 2017 excise duty cut cost the government Rs 26,000 crore in annual revenue and about Rs 13,000 crore during the remaining part of the current fiscal year. The government had between November 2014 and January 2016 raised excise duty on petrol and diesel on nine occasions to take away gains arising from plummeting global oil prices. In all, duty on petrol rate was hiked by Rs 11.77 per litre and that on diesel by 13.47 a litre in those 15 months that helped government’s excise mop up more than double to Rs 2,42,000 crore in 2016-17 from Rs 99,000 crore in 2014-15. State-owned oil companies – Indian Oil Corporation, Bharat Petroleum Corporation and Hindustan Petroleum Corporation – in June last year dumped the 15-year old practice of revising rates on the 1st and 16th of every month. Instead, they adopted a daily price revision system to instantly reflect changes in cost. Since then prices are revised on a daily basis. Evan Gattis Womens Jersey
Mundra Solar eyes to become $1 bn company in 2-3 years
Mundra Solar PV, the solar photovoltaic manufacturing arm of diversified Adani Group, looks to become a $1 billion company over the next 2-3 years, a top company official said. The company is also hoping to scale up its manufacturing capacity of modules and cells from the current 1,200 MW to around 3,000 MW in the next 2-3 years. “We are very buoyant on growing our business and we are positive we will expand it depending on the way the government policy comes out which we feel will happen soon,” company’s chief executive Ramesh Nair told PTI over a telephonic interview. He said already actions are on the ground as the government has given the go ahead for pass through of any hike in case of the safeguard duty and the manufacturing policy is in its final stages. “Recently, the government announced that it will amend bidding rules to allow pass through of duty hike on solar. This has come as a major relief for developers as well. We hope we will be able to become a $1 billion company in the next 2-3 years,” he added. Currently, Mundra Solar has a manufacturing facility with a capacity of 1,200 MW in the Special Economic Zone at Mundra in Gujarat. “Manufacturing in India will have to increase as we cannot continue with letting Chinese products being dumped here. With the recent decisions taken and the government’s vision of 100 GW of solar capacity by 2022, manufacturing capacities in India will increase. We will also expand our capacity and depending on the manufacturing policy how it plays out we will also look at growing through backward integration,” Nair added. When asked whether the 100 GW target was achievable given the slow pace of awarding of contracts, he said, “It is indeed an achievable target. What is important is that the government needs to award contracts for almost 20 GW every year. Last year only 8,000 MW capacity was added but if we have to achieve the 100GW target the government will have to increase the pace of capacity addition.” Josh Reddick Womens Jersey
Lakdanavi wins Kerawalapitiya 300MW LNG power plant tender
After a string of bureaucratic hullabaloo in tender procedure, the much delayed Kerawalapitiya 300MW Liquified Natural Gas (LNG) power plant bid was recently awarded to Lakdanavi Ltd, the largest independent power producer in the country, a top bureaucrat divulged. The 18 month impasse in selecting a suitable bidder to build the 300MW Kerewalapitiya LNG Power Plant has ended marking a significant step forward for a new era of LNG power in Sri Lanka, Secretary to the Ministry of Power and Renewable Energy Dr. Suren Batagoda said. Lakdanavi Ltd, a power plant construction and operation subsidiary of LTL Holdings (Pvt) Ltd, which is a subsidiary of the state-owned Ceylon Electricity Board (CEB), placed the lowest bid, he told the Business Times. Proposals for this 20 year Build, Own, Operate and Transfer (BOOT) project were opened in April 2017 and it took almost one year to fast track the project due to tender irregularities and political pressure, a senior member of the CEB engineers union said. The delay has caused a loss of over Rs. 18 billion, he said adding that plans to build the power plant were suspended after detecting certain irregularities in the tender procedure to select the company to construct the plant. The awarding of the tender had dragged on further owing to certain disagreements in opening the financial bid of Samsung JV Korea Group without considering bids of seven other firms. The Standing Cabinet Approved Procurement Committee (SCAPC) had opened tenders that pass the technical evaluation of the Tender Evaluation Committee(TEC), in order to ensure transparency in procurement. In another development, Petronet LNG Ltd, India’s biggest importer of gas, and its Japanese partners have completed a feasibility study for the proposed Liquefied Natural Gas (LNG) Terminal and the Floating Storage Regasification Unit (FSRU), Dr. Batagoda said. Sri Lanka has signed a tripartite MoU with India and Japan to conduct this feasibility study with the approval of the cabinet. The Cabinet of Ministers has also authorised Sri Lanka Gas Terminal Ltd to enter into agreements with the Indian and Japanese partners to establish the proposed pubic private partnership. Sri Lanka Gas Terminal Ltd will hold a 15 per cent stake in this joint venture while 47.5 per cent of the stake will be with the India’s Petronet LNG Ltd. Some 37.5 per cent shareholding of this venture will be jointly vested in Japan’s Sojitz Corporation and Mitsubishi. The LNG terminal is to be located within the Colombo Port and pipelines from the port will transport the gas to two dual-fuel power plants in Kerawalapitiya expected to be completed around 2021. Petronet LNG Ltd. will finalise negotiations with Sri Lankan authorities to build the country’s first liquified natural gas terminal project in Colombo and expects to receive commercial clearance by August this year. The project capacity of the floating LNG receipt facility off the island’s western coast, is 2.6-2.7 million tonnes per year and would cost around US $350 million. Johnny Hekker Authentic Jersey
IOC to enter battery vertical
The Indian Oil Corporation (IOC) is gearing up to enter the battery vertical soon and willing to acquire superior technologies for that, and customise them to Indian conditions while improvising on its lead-acid storage solutions. This foray is intended to produce batteries that help in driving electric vehicles beyond the 50-km range. It comes amidst the prophecy that all vehicles powered by internal combustion engines are going to be phased out with the electric drives taking their place. “Domination of the Indian roads by the electric vehicles is going to take a long time, mainly due to the pricing and logistical issues,” said IOC Director (R&D) S.S.V. Ramakumar. Pilot project Addressing the media after inaugurating a CNG station at Ibrahimpatnam here on Saturday, Ramakumar said another cutting-edge technology, which the IOC’s R&D division was set to take from the lab to the roads in the near future, was hydrogen and Compressed Natural Gas (CNG) mixtures, which were being piloted by a Delhi Government-owned fleet of buses. “The IOC is prepared to make an on-site production of these fuels once the result of the trials is known,” he said. “A nano-material that helps LPG in cutting metals with greater finesse when its temperature is increased from the present 1,900 to 2,500 degree celsius is under development. This will facilitate elimination of highly toxic oxy-acetylene gas being used by the heavy industries, including ship breaking units,” he said. Ramakumar said a product set for pan-India launch was a superior blend of engine, transmission and axle oils, which was validated in Karnataka. This category of products would bring down the tail-pipe emissions of commercial vehicles by 30% and give a fuel saving of 4 to 5%. BS VI fuels Ramakumar further said the IOC was in the forefront of producing BS-VI fuels, which would have 10 PPM of sulphur compared to 50 PPM in the BS-IV variants and just 8% of polyaromatic hydrocarbons (which are carcinogenic) against 11% in BS-IV fuels. An enzyme that the IOC started producing in-house was going to break the global monopoly of a US-based company. With it, the expenditure entailed by the enzyme consumption in the manufacture of ethanol would decline substantially, Ramakumar added. Seth Roberts Authentic Jersey
Piped gas to 3 localities of Patna soon
The Gas Authority of India Limited (GAIL) will shortly launch piped natural gas (PNG) for houses and compressed natural gas (CNG) for transport sector in Patna. The project is coming up as part of the Jagdishpur-Haldia-Bokaro-Dhamra pipeline under Pradhan Mantri Urja Ganga Yojana, which will connect the eastern and north-eastern states to the national gas grid, said GAIL public relations executive Jyoti Kumar on Friday. “A ‘city gas station’ is being constructed at Phulwarisharif, from where the green fuel will be distributed as PNG for houses, CNG for transport sector and also to the industries as a green and clean fuel,” Jyoti told this newspaper. He said under the pilot project, PNG will be provided to around 1,200 houses in Jalalpur City, Patna campus of BIT Mesra and 96 quarters of Building Construction Department on Bailey Road. He said there is a plan for setting up CNG stations at six locations in Patna. “Under the pilot project, two stations will be completed initially for which necessary permissions have already been received. The construction work is likely to start by the end of May,” Jyoti said. He further said the Jagdishpur-Haldia-Bokaro-Dhamra pipeline project is divided into three phases to cover the regions of Uttar Pradesh, Bihar, Jharkhand, West Bengal, Odisha and Madhya Pradesh. This gas network will supply fuel to major industries such as the refinery plant at Barauni and various other industrial plants. “A 232-km-long spur pipeline connecting Dobhi, Barauni, Patna and Naubatpur is already in the final stages. It will supply piped domestic gas from the main Jagdishpur-Haldia pipeline. It’s one branch originates from Gaya and passes through Nalanda before reaching Begusarai while another one is from Nalanda and passes through Patna, Saran, Siwan, Gopalganj and West Champaran,” Jyoti said. Deliberating on the gas grid in the region of Bihar, Jyoti said, “The main pipeline from Dhobi to Naubatpur near Patna has been completed and commissioning of the same is underway. Further, the 22km-long pipeline from Naubatpur to Phulwarisharif is likely to be completed by October 2018.” The GAIL official said the infrastructure for the project is being set up with an investment of Rs.3.57 billion in initial five years and will be expanded for 25 years with an investment up to Rs 12.57 billion. “PNG is a safe, convenient and economically cheaper in comparison with other cooking gas. With the use of natural gas, pollution in the city will be reduced to a great extent. Also, as natural gas will be used as a cooking gas, the residents will be benefited economically and free from worries of cylinders,” Jyoti added. Malcolm Mitchell Authentic Jersey
Nagarjuna Oil goes for liquidation as bidding fails
The beleaguered Rs 4,700-crore Nagarjuna Oil refinery project at Cuddalore in Tamil Nadu has entered the liquidation process under the Insolvency and Bankruptcy Code (IBC) after the 270-day deadline, offered by National Company Law Tribunal’s Chennai bench to identify a successful bidder, ended on Friday. With no successful bidder or a resolution plan in place, the Committee of Creditors (CoC) has recommended liquidation and the same has been informed by the resolution professional (RP) to NCLT on Friday evening. Nagarjuna Oil Corporation’s (NOCL’s) books show a secured debt of Rs 8,000 crore and an unsecured debt of Rs 800 crore. The four bidders which came forward — BPCL, Citax Ventures, Gulf PetroChem and Haldia Petrochemicals — submitted bids lower than Rs 1,450 crore set as liquidation valuation, hence rejected. Nagarjuna Oil — backed by Nagarjuna group, Tatas and Trafigura — planned to set up a 6 mtpa (metric tonnes per annum) oil refinery in Cuddalore. This project was later recommended to be the anchor client for the Petroleum, Chemicals & Petrochemicals Investment Region (PC&PIR) by the Tamil Nadu government to the Centre, which too accepted and declared the Cuddalore zone as a PC&PIR region. “The CoC was not happy with the resolution plan that successful bidders had submitted, as they found them far below liquidation value. It is sad that NOCL is going for liquidation. May be something good can happen in the liquidation process itself,” NOCL’s RP, S Rajendran, appointed by the NCLT, told TOI. “The process will take a few days and NCLT will have to appoint a liquidator. I have declined to take up that role, since I came here to ensure a resolution,” Rajendran added. On Friday, the NCLT dismissed a petition by employees seeking to ensure their rights, as the process of liquidation was out to take place, on certain grounds. Another petition moved by the RP before the NCLT to direct Chennai Corporation, which had sealed NOCL’s office in Chennai for non-payment of dues on Monday this week, was posted for further hearing, with a notice to the Chennai Corporation, it is learnt.