Roads ministry targets laying over 40 km of roads every day in 2016-17
The road transport and highways ministry has set an ambitious target of laying more than 40 km of roads every day in 2016-17, more than double the current pace. A senior official said the National Highways Authority of India (NHAI) will construct 8,000 km in the fiscal year while the Industrial Development Corporation (NHIDCL), which lays roads in hilly areas, will construct 7,000 km. The roads award target has been set at 25,000 km against the 10,000 km awarded last year, the official added. “The construction target has been set at 15,000 km against the 6,000 km constructed last year. However, the budget for the current year has set the construction target at 10,000 km,” the official said. “We are confident of doing much better than the budget target set by the finance minister.” Of the total length of national highways targeted for award, 15,000 km would be awarded by NHAI and 10,000 km by NHIDCL, the ministry said in a statement. In 2015-16, the ministry was able to award 10,000 km of highway contracts worth Rs 1lakh crore. In the current budget, the road ministry has got an allocation of Rs 57,000 crore and NHAI has been allowed to raise tax-free bonds of Rs 15,000 crore. The ministry is also looking at additional options to raise funds through EPFO and LIC and by leasing out existing projects on tolloperate-transfer (TOT) model. “We are looking at awarding contracts worth Rs 2.5 lakh crore. We are already in talks with LIC and EPFO to raise Rs 1 lakh crore. The remaining amount would be raised through leasing out our already constructed national highways to pension fund and PE players under the TOT model,” the official said. ELECTRONIC TOLL: NHAI is making cashless payment mechanism (FASTag) operational at 275 toll plazas from Monday. FASTag will offer near non-stop movement of vehicles through toll plazas and convenience of cashless payments of toll fee with nationwide inter operable electronic toll collection services. India has 350 toll plazas. FASTag will become operational at the remaining toll plazas within a year. NHAI will give 10% cash back incentive on toll payments for FASTag users. According to a study by Transport Corporation of India and IIM Kolkata, Rs 60,000 crore is lost on account of delays at various check posts. NHAI has tied up with ICICI Bank and Axis Bank for the service. FASTag has a one-time fee of Rs 200 and is affixed on the wind screen of the vehicle.It employs RFID technology for making toll payments directly from the prepaid account linked to it. FASTag will be available on sale from selected toll plazas on national highways and designated branches of participating banks. These can be recharged by making payments through cheque or online. The minimum recharge amount is Rs 100 and the maximum is Rs 1 lakh for commercial vehicles.
Rs 11.4 lakh-crore worth projects stalled till March: ICRA
Owing to unfavourable market conditions, increased funding constraints and inadequate raw material linkages, nearly Rs 11.4 trillion worth of infrastructure projects were stalled as of March 31, says ICRA. According to the rating agency, though the number of stalled projects started declining since FY14, it took pace from the second half of 2015-16. Majority of the projects, which were stalled were from the private sector including from the sectors like steel, cement, aluminium, among others. “The Project Monitoring Group (PMG) of the government helped in resolving 353 projects worth Rs 11.7 trillion stalled over the last 3 years, which were particularly in power sector, but addition to projects accepted by PMG outpaced projects resolved,” ICRABSE 1.27 % said. The Group, which was set up in January 2013 in the Cabinet Secretariat to revive projects both in the public and private sector, had accepted 743 projects with an estimated cumulative investment of Rs 31 trillion till February this year. According to ICRA, another 390 projects with a cumulative investment of over Rs 19 trillion are still facing hurdles. “The growing number of stalled projects in the last two quarters, which are already high at 8 per cent of GDP is a matter of concern. While many projects were stuck for want of land or clearances, with the changing macro-economic scenario and weak commodity prices, viability and promoters’ interest to continue with the projects, have also declined,” ICRA Senior Vice-President Rohit Inamdar told reporters during a webinar. This apart, funding issues have also remained pertinent for infrastructure sector, which comprises the largest share of stressed advances for public sector banks – the primary lenders for infrastructure projects, he said. “Apart from reviving stalled projects, the implementation of the proposed plug-and-play model, which aims at awarding major projects after acquiring land and the requisite approvals, is expected to significantly reduce execution delays and attract higher private participation in the sector,” Inamdar said. He further noted that the recovery in the sector will be gradual as most players are still burdened with leveraged balance sheets even as the volume of stalled or slow moving projects remains sizeable. “Further, structural constraints like uncertainty in land acquisition, delays in approvals and inadequacy of long-term funding avenues, if not tackled expeditiously, will slow down recovery in the infrastructure sector,” Inamdar added.
E-toll starts from Monday! Now, make cashless payments at 275 toll plazas
You will be able to zip through toll plazas across the country from Monday as National Highways Authority of India (NHAI) is making cashless payment mechanism (FASTag) operational at 275 toll plazas FASTag will offer near non-stop movement of vehicles through toll plazas and convenience of cashless payments of toll fee with nationwide inter operable electronic toll collection services. India currently has 350 toll plazas. FASTag will become operational at the remaining toll plazas within a year. NHAI will give 10% cash back incentive on toll payments for FASTag users. The cash back amount for a particular month will be credited back to the FASTag account at the beginning of the next month. A Transport Corporation of India and IIM Kolkata study said that Rs 60,000 crore was lost on account of various delays at check posts NHAI has tied up with ICICI bank and Axis bank for the service. FASTag has a onetime fee of Rs.200 and is affixed on the wind screen of the vehicle. It employs RFID technology for making toll payments directly from the pre-paid account linked to it. FASTag will be available on sale from selected toll plazas on national highways and designated branches of participating banks. These can be recharged by making payments through cheque or online. The minimum recharge amount is Rs100 and can be up to Rs.1 lakh for commercial vehicles.
Raghuram Rajan warns against ‘euphoria’ over fastest-growing tag
Warning against being “euphoric” about India being the fastest-growing economy, RBI governor Raghuram Rajan on Wednesday sought to contextualise his “one-eyed king” remarks about India’s growth and said the country has a long way to go before it claims to have arrived. “As a central banker who has to be pragmatic, I cannot get euphoric if India is the fastest growing large economy,” he said. Seeking to explain his ‘one-eyed king’ comments, Rajan said his comments were “hung out to dry out of context” and even offered an apology to the visually-impaired for hurting them by the use of the proverb. Stating that the per-capita income of Indians remains lowest among BRICS, Rajan said, “We have a long way to go before we can claim we have arrived. We need to repeat this performance (economic growth) for 20 years before we can give each Indian a decent livelihood.” He also said India’s global reputation holds great promise, but is seen as a country that has under-delivered and that it should “implement, implement, and implement” the structural reforms. Speaking at the convocation of National Institute of Bank Management, Rajan said India is yet to achieve its potential growth though it is on the cusp of that and a substantial pick-up in growth can be achieved with pending reforms. Making a reference to his last week’s interview to a foreign publication where he likened India being the fastest-growing major economy to a case of the one-eyed man being king in the land of the blind, Rajan said his comments were interpreted as having denigrated the country’s success rather than emphasising on the need to do more. “… Every word or phrase that a public figure speaks is intensely wrung out of meaning. When words are hung out to dry out of context as in the newspaper headline, it only becomes a fair game for anyone who wants to fill in, meaning to create mischief,” he said. Finance minister Arun Jaitley had rebutted Rajan’s remarks, saying compared with the rest of the world, the Indian economy is growing much faster and, in fact, the fastest. Commerce minister Nirmala Sitharaman too had not taken Rajan’s remarks lightly, saying better words should have been used. Rajan said commonly used words or proverbs can “most easily and deliberately be misinterpreted”. “If we are to have a reasonable public dialogue, we should read words in their context, not stripped of it,” he said. He, however, apologized to the visually-impaired whose association had criticised Rajan for using the proverb. “I do want to apologize to a section of the population that I did hurt with these words, that is the visually impaired, or the blind,” Rajan said. Queried for his take on India being the ‘bright spot’, Rajan during last week’s interview had said: “I think we have still to get to a place where we feel satisfied. We have this saying ‘In the land of the blind, the one-eyed man is king’. We are a little bit that way.”
Indian Institute of Petroleum and Energy likely to function at Andhra University from this year
The Central government is making arrangements to operationalise Indian Institute of Petroleum and Energy (IIPE) from this year itself and as a part of it, the official visit of Joint Secretary of Ministry of Petroleum and Chemicals Sushmarath to Andhra University on Tuesday assumed significance. It is learnt that efforts are on to introduce first year B Tech and M Tech courses in Petroleum and Chemical Engineering from this July temporarily at the AU College of Engineering. About the admission process, the authorities would allow 60 seats each in two B Tech courses while 18 seats each in the two M Tech courses for which the Andhra University authorities have to make arrangements for class rooms, laboratories, library, seminar halls and other facilities. Joint Secretary from the Ministry of Petroleum and Chemicals Sushmarath initially held a meeting with Collector N Yuvaraj, In-charge Vice Chancellor Prof E A Narayana, Registrar Prof V Umamaheswara Rao and Principal of AU College of Engineering (A) Prof Ch V Ramachandra Murty at the In-charge Vice-Chancellor Chambers before leaving for a field visit. Later, they visited three buildings on the engineering college campus-including New Classroom Complex and Delta Studies Institute. HPCL Executive Director G Sriganesh, General Manager (HR) A S V Ramanan, Chief Manager K Nagesh and Deputy Manager G Sasibhushana Rao also accompanied the Joint Secretary in her field visit.
GAIL seeks interest in swapping out U.S. LNG supplies
GAIL (India) Ltd has been seeking to swap some of its contracted gas supplies from Sabine Pass Liquefaction in the United States to reduce shipping costs. GAIL has a contract to buy 3.5 million ton a year of liquefied natural gas from Sabine Pass on a FOB basis for 20 years. The supplies are expected to begin from the first quarter of 2018, a document posted on the company’s website showed. The Indian firm wants to swap LNG on a FOB basis with firms that have customers in countries in which LNG trade is not prohibited by US law and sanctions. In exchange GAIL is seeking equivalent supplies on a delivered basis at Indian regasification terminals at Dahej and Dabhol in western India. Trade sources last year told Reuters that GAIL has sold at least 0.5 million tons a year of LNG to Royal Dutch Shell.
Indian refiner BPCL to set up Singapore trading unit
Bharat Petroleum Corp plans to become the first Indian state refiner to open a trading unit in Singapore to take advantage of new crude import rules to buy cheaper oil and get better terms from producers. The move also underscores the growing clout of the world’s third-largest oil-consuming country and its desire to diversify import streams. BPCL, India’s No.2 state refiner, wants to exploit the shifting dynamics of the international oil trade caused by a supply glut to boost its margins. India this month began allowing state refiners – which control two-thirds of the country’s 4.6 million barrels per day (bpd) in refining capacity – to set their own crude import policy, freeing them from the grip of decades-old regulations. This has put state firms on par with private refiners Reliance Industries and Essar Oil that have global trading arms and achieve better margins. “Very shortly we will be opening … we will do it as fast as possible and scale up thereafter,” B. K. Datta, head of refineries at BPCL, told Reuters in an interview. He declined to say exactly when BPCL would be opening a Singapore office. Setting up shop in Singapore would give BPCL access to international trading talent and market intelligence, but the unit is expected to be headed by a company insider. It will initially procure spot crude for BPCL, which along with its subsidiary, Bharat Oman Refineries Ltd (BORL), controls 550,000 bpd in refining capacity. “Slowly we will try to shift all major activities there,” Datta said, handling products and crude trading and shipping. BPCL on average buys 100,000-120,000 bpd of crude oil from spot markets. The state refiner also handles about 240 vessels for crude imports, including some for its subsidiary BORL, according to data compiled by Reuters. “In an over-supplied market it is better to buy spot crude and if you have a trading firm you will have access to first hand information. This will help in getting feed stock at cheaper rates,” said Ehasan Ul-Haq, senior consultant at UK-based consultancy KBC Energy Economics. The trading arm will also give BPCL more flexibility in its operations, giving it the option to resell crude to other refiners or supply its own refineries to boost profitability, Haq said. BPCL is aiming to set up its Singapore trading operation just ahead of refinery capacity expansions. The company will by October complete the expansion of its Kochi refinery in southern India to about 300,000 bpd from 190,000 bpd. BPCL also wants to increase the capacity of its 120,000 bpd Bina plant in central India to 156,000 bpd by 2018. “This is an ideal time to enter into the trading business as crude prices are low and you can test the waters without spending money for leasing the storage. You can trade through floating vessels,” Haq said. In addition to its refinery expansions, BPCL will invest 40 billion rupees ($600 million) to upgrade the quality of fuels produced at its Mumbai and Kochi refineries to Euro VI norms by September 2019 – ahead of a government deadline of April 1, 2020.
After 3 years of trying, India to achieve 5% ethanol blending
After over three years of making 5% of ethanol blending with petrol mandatory, India is set to achieve this target for the first time during the current sugarcane crushing season, that is, by the end of September 2016. To achieve this target, the blenders, or oil marketing companies (OMCs), require 1335 million litres of ethanol every sugarcane crushing season (October-September). Since grains-based ethanol is not allowed to be produced in India, OMCs remained fully dependent for its procurement from sugar mills for which the green fuel is a by-product. “The PM’s personal commitment to renewables and the petroleum ministry’s focus on solving price and implementation hurdles have made a huge difference on the ground. Ethanol in fact, became a key part of the solution for the crisis in the sugarcane sector,” said Narendra Murkumbi, MD, Shree Renuka Sugars Ltd, India’s largest producer of ethanol. The development is likely to transform the fortunes of sugar mills that have been under pressure for the past several years due to falling sugar prices. Until last year, lower price offer and slow pick-up to the contracted quantity of ethanol by OMCs deterred viability of its supply from sugar mills. “OMCs have finalised contracts to procure ethanol to the tune of 1340 million litres for the current year which works out to exactly five percent blending requirement. For ethanol now there is an assured buyer at confirmed price. So, lots of sugar mills prefer to supply ethanol to OMCs rather than to industrial or potable alcohol users,” said Abinash Verma, Director General, Indian Sugar Mills Association (ISMA). In November 2012, the Cabinet Committee on Economic Affairs (CCEA) approved five percent mandatory blending of ethanol with petrol which was notified by the Centre under the Motor Spirits Act on January 2, 2013. According to the Act, OMCs have to record five percent ethanol content in petrol by June 30, 2013. However, considering weak supply orders on un-remunerative price offer, OMCs managed to achieve to a maximum 3.5 per cent so far. While sugar mills blamed lower price for inadequate supply offer of ethanol, OMCs accused falling crude oil price for the low price quotes as blending of ethanol could be a loss making proposition. As against a maximum price fixed for ethanol supply at Rs 43 till the contracts finalised till December 2014, the government in January 2015 raised its prices to Rs 48.5 – 49.5 a litre depending upon the proximity of the delivery station from the distillery units. Interestingly, OMCs had floated tenders for the requirement of 2660 million litres equivalent to 10 per cent of blending target. But, the target of 10 per cent ethanol blending with petrol looks unachievable in near future. Sanjay Tapriya, CFO, Simbhaoli Sugars Ltd said, “attractive price and assured pick up is also helping to achieve 5 per cent blinding target.” The demand of rectified spirit (a pre-from of ethanol) has shifted from domestic sugar mills to overseas markets including the United States and Brazil as its landed cost on Indian ports works out to nearly 25 per cent cheaper. As against the price quote of Rs 40-42 a litre from domestic sugar mills, the imported alcohol for industrial consumption costs Rs 30 a litre now. “As a consequence, around 700 million litres of demand for industrial application has moved to overseas markets. Indian chemical industry has imported an estimated 200-210 million litres so far this crushing season,” said Rakesh Bharatia, Chief Executive Officer, India Glycols Ltd. Meanwhile, OMCs have floated tenders for ethanol procurement of 2660 million litres, equivalent to 10 per cent of blending target which seems achievable gradually in five years. But, sugar mills are required to invest immensely in expansion in the distillation and storage facilities. According to Deepak Desai, Principal Consultant of ethanolindia.com, new investment has started coming in into expansion in distillation capacity or storage facilities. Through B-heavy molasses, supply of ethanol can be increased to 5300 million litres gradually in the next few years from the existing 2800-3000 million litres now to meet demand from all the three segments including potable alcohol, fuel ethanol and industrial alcohol.
Cash flow for construction sector to improve in FY17: Report
Cash flow for construction companies is likely to improve in 2016-17 as most of the orders procured in the last two years are expected to be executed this fiscal, says a study by India Ratings (Ind-Ra). According to the study, companies in the construction sector continued to witness negative cash flows from operations in 2015-16, which is likely to improve gradually to near zero levels this fiscal as more orders procured during the last two years are executed. “Competitive intensity had reduced for new orders over the last two years and hence margins on such orders are expected to be higher,” the ratings agency said. Order inflow in the construction sector is likely to grow as the government has increased outlay for highways and railways in the Union Budget 2016-17. The government increased allocation for highways by 28 per cent and targets to award 10,000 kms of highways in 2016-17. The government has also laid out ambitious targets for spending on other infrastructure sectors like irrigation, drinking water supply, housing and power supply. “Prudent accumulation of orders with close correlation between capacity to execute and order book size will be crucial to improvement in the cash flows and credit metrics of individual companies,” it said. Ind-Ra further said it expects companies to focus on margins and funding while bidding for new projects and to limit their order books near the current level as a multiple of revenue, which will provide for a moderate growth in revenue along with improvement in cash flow margins. According to the agency, the negative cash flows from operations are a legacy of the aggressive bidding seen during FY10-FY12, when companies focused on building their order books. “In such orders, EBITDA margins were very close or even lower than retention money margins in some cases, leading to negative operational cash flows. Also, the companies did not focus on funding by the customer, resulting in long receivables and inventory holding periods,” the study said. It further said construction sector’s receivable days has widened by 33 per cent to 141 days and inventory holding period has risen by close to 9 per cent to 124 days in the last five years. “Construction sector is likely to see gradual improvement in FY17, even as liquidity remains weak due to negative cash flows,” Ind-Ra said.
Zurich Airport sells 5% stake in Bengaluru airport to Fairfax for $48.9 mn
Zurich Airport has inked an agreement to sell its 5 per cent minority shareholding in Bengaluru International Airport Ltd (BIAL) to the Prem Watsa-backed Fairfax Holdings for $48.9 million. Subject to customary regulatory approvals, the deal is expected to be completed within the third quarter of 2016. While there has been no word on the agreement from Fairfax, Zurich Airport has announced it on its website. BIAL owns and operates Kempegowda International Airport Bengaluru (KIAB) under a 30-year concession agreement from the Indian Government, with an option for a further 30-year extension. KIAB, which began operations in 2008, is among the first greenfield airports in India built under a public-private partnership. It is now India’s third largest airport. Since the start of construction in 2005, Zurich Airport has transferred its operational expertise to BIAL through an Operations, Management & Services Agreement. With the conclusion of the maintenance contract in 2015, Zurich Airport’s role has been reduced to a minority shareholder, leading to the decision to monetise the remaining 5 per cent stake in BIAL. In 2009, Zurich Airport had sold 12 per cent of its shareholding in BIAL to GVK Power & Infrastructure Ltd. Ownership pattern The GVK Group, which had acquired a 29 per cent stake from L&T and Zurich Airport and 14 per cent from Siemens Project Ventures in the past, recently divested its 33 per cent stake in the airport to Fairfax Financial Holdings Ltd for ?2,149 crore, to pare its corporate debt. GVK’s stake is now 10 per cent, while Fairfax is the largest shareholder with a 38 per cent stake (including the Zurich Airport stake). Siemens has a 26 per cent stake, while the Airports Authority of India and the Karnataka government hold 13 per cent each.