Aviation policy likely to be cleared by Cabinet this month
A degree of “consensus” among various stakeholders on issues in draft civil aviation policy including norms for international flying by domestic airlines has “emerged” and it is likely to be approved by the Cabinet this month, a top official said today. “(As far as) 5/20 and other issues raised in the draft civil aviation policy (are concerned), a degree of consensus has already emerged,” Civil Aviation Secretary R N Choubey told reporters on the sidelines of the 29th anniversary of Bureau of Civil Aviation Security (BCAS). Under the ‘5/20 rule’ only those airlines having at least five years of domestic flying experience and a minimum of 20 aircraft are allowed to fly overseas. BCAS is country’s nodal aviation security agency. Choubey said that his ministry will be taking the matter to the Cabinet this month itself, adding, “the (new aviation) policy, which will also clear the position on 5/20, will be approved this month.” The draft policy was unveiled in October last year and since then Government has held extensive consultations with various stakeholders including ministries, airlines,airport operators, ground handling agencies, among others during this period. We have already done a couple of rounds of inter ministerial consultations. We will now be in a position to take the matter to the Cabinet this month,” he said. The policy was expected to be finalised in the previous financial year as certain proposals were to be implemented from April 1, 2016. While startup carriers Vistara and Air Asia India, where Tatas is a stakeholder, are demanding that the 5/20 rule be done away with, the grouping of four private Indian carriers comprising IndiGo, SpiceJet, Jet AirwaysBSE 3.56 % and GoAir wants the rule to continue. The proposed policy seeks to give a boost the Indian aviation sector, which has high growth potential, and strengthen regional connectivity. It has suggested tax incentives for airlines, maintenance and repair works of aircraft besides mooting 2 per cent levy on all air tickets to fund regional connectivity scheme. There are other significant proposals such as increasing FDI limit for foreign airlines, setting up of no-frills airports and providing viability gap funding for airlines to bolster regional air connectivity as well.
Cooking gas LPG down Rs 4 per bottle, jet fuel price up 8.7%
Aviation Turbine Fuel (ATF), or jet fuel, price was today hiked by 8.7 per cent but that of non-subsidised cooking gas LPG was cut by Rs 4 per cylinder on global trends. ATF price in Delhi was raised by Rs 3,371.55 per kilolitre (kl), or 8.69 per cent, to Rs 42,157.01 per kl, oil companies said today. The hike comes on the back of a marginal 1.3 per cent or Rs 515.85 cut in rates on March 10. Prior to that, rates were hiked by steep 12 per cent, or Rs 4,174.49, on March 1, almost neutralising a Rs 4,765.5 cut on February 1. The March 1 hike broke the cycle of three consecutive monthly price reductions. Rates vary at different airports because of differential local sales tax or value-added tax (VAT). Jet fuel constitutes over 40 per cent of an airline’s operating cost and the price increase will add to the financial burden on cash-strapped carriers. No immediate comment was available from airlines on the impact of the price increase on passenger fares. Simultaneously, the oil firms cut prices of non-subsidised LPG, which consumers buy after exhausting their quota of 12, by Rs 4 per 14.2-kg bottle. Non-subsidised cooking gas (LPG) now costs Rs 509.50 in Delhi as against Rs 513.50 previously. This is the third reduction in rates in a row. Prices were last cut by Rs 61.50 on March 1. Rates were reduced by Rs 82.5 per 14.2-kg bottle on February 1. Subsidised LPG costs Rs 419.33 per 14.2-kg cylinder in Delhi. The three fuel retailers – Indian Oil Corporation, Hindustan Petroleum and Bharat Petroleum – revise jet fuel and non-subsidised LPG prices on the first day of every month, based on the average international price in the preceding month. The ATF price cut on March 10 was on account of change in taxation.
European Investment Bank to lend $512 million for Lucknow metro
The European Investment Bank will give 450 million euros ($512 million) in loan to India to finance the construction of Lucknow’s first 23 km-long metro rail line and purchase a fleet of new trains. An agreement on the first tranche of the credit was signed in Brussels on Wednesday during the 13th EU-India summit attended by Prime Minister Narendra Modi. The loan represented the largest project financing by European Union’s official bank, also the world’s largest international public bank, in India since its engagement in the country began more than 20 years ago and the most significant investment in sustainable public transport outside Europe, Luxembourgbased European Investment Bank (EIB) said. The 450 million euro ($512 million) long-term loan – expected to cover half of the total project cost for the Lucknow Metro – will be used to finance the first metro line in Lucknow, including both construction of the 23 km-long new metro line and a fleet of metro trains. The line is the first part of a broader metro network planned for Lucknow, the capital city of Uttar Pradesh. When it becomes operational, the new metro is expected to increase the use of public transport from 10 per cent to an estimated 27 per cent in the city of three million people, the bank said in a statement. EIB president Werner Hoyer said the bank would expand its support for long-term investments in India and unveiled plans to open a regional representation for South Asia in New Delhi by the end of this year. The EIB has supported long-term investment across India that has helped the country harness renewable energy, strengthened industry and reduced carbon emissions. The bank recognises that the time is right to increase its engagement in India, Hoyer said. “The first metro line in Lucknow is a flagship project not only for Uttar Pradesh and India, but also for the bank’s strengthened global commitment to support transformational investment,” Hoyer said. The loan agreement was signed by India’s Ambassador to Belgium, Luxembourg and the EU Manjeev Singh Puri and EIB Vice President for Asia Jonathan Taylor in the presence of Modi, European Commission President Jean-Claude Juncker and European Council President Donald Tusk. The EIB had committed loans totalling more than 1.34 billion euros for longterm investment in India since the cooperation began in 1993.
110 Lucknow corporators to get more devpt fund
In a big surprise for 110 corporators of city who often fell short of development funds, LMC House on Thursday allocated Rs 80 lakh as maximum limit for development fund for each ward. The earlier limit was Rs 60 lakh which has now been increased by Rs 10 lakh while another Rs 10 lakh has been reserved for emergency constructions, like park, road repair, and re-boring of hand-pumps etc; in each ward. This fund is at the discretion of municipal commissioner. He can release the money if he finds the requirement genuine. The decision comes following a heated discussion wherein the corporators demanded Re 1 crore per ward while the mayor agreed to allocate only Rs 75 lakh per ward. The common man can also breathe easy as LMC’s proposal to increase door-to-door waste collection charges was turned down by the mayor. LMC wanted to increase user charges to be able to pay increased share to its private partner. The mayor said, “We have turned down the proposal and would sent it back to the state government. We will also ask the government to give us some funds to be able to meet the cost of running waste treatment plant.” LMC’s policy to fine people Rs 500 for throwing garbage or peeing in open, resorting to open defecation in areas with public toilets and for burning garbage on roads got a go-ahead in the house too. Under budget provisions, Rs 150 crore has been sanctioned towards building new Kalyan Mandaps, Rs 50 crore for making a new electric crematorium near Gulalaghat, Rs 20 crore for a tempo shelter home in Rajajipuram and Rs 35, 30 and 50 crore towards making open air gyms in parks, mini sports complex and temporary shelter homes in city respectively. 5% rebate on house tax to those installing solar panels and supplying energy to the main grid. Also 5% rebate to people using rain water harvesting projects in houses Mayor instructs LMC to streamline the process of online dissemination of birth and death certificates to people, asks to remove bottlenecks in procedure on priority Identifies 0.414 hectare land in Kamta for developing an outdoor stadium in future Approves 23.84 hectare land for developing fifth waterworks for catering to water supply of Alambagh and other areas of zone-5 Approves forming of an SPV to execute smart city project in Lucknow, to take 40% extra house tax as smart cess from people whose houses get revamped under retrofitting model Rs 100 crore allocated to Aanchal shelter home in Adil Nagar, Rs 60 crore for orphanage in Alambagh. Rs 100 crore have been also proposed for making a management institute in future.
Bricks-and-mortar mortar retailers set to regain pricing power: CRISIL Ratings
The recent guidelines issued by the Department of Industrial Policy & Promotion (DIPP) on foreign direct investment in online marketplaces will improve profitability and cash flows of bricks-and-mortar retailers, CRISIL Ratings has said. According to the agency, the revised guidelines will cushion the impact of marginally higher capex intensity and support physical retailers’ credit profiles. Also read: Guidelines on e-commerce markets may save small and medium sellers from being arm twisted “Revenue growth for bricks-and-mortar retailers, especially in the apparel and consumer durables segment, should improve as pricing gradually gravitates towards parity with online marketplaces. This, coupled with expectedly greater pricing power and store productivity, will provide a fillip to profitability,” said Anuj Sethi, director at CRISIL Ratings. DIPP has permitted 100% FDI for online marketplaces under the automatic route while defining the marketplace model of e-commerce. It has stipulated some restrictions, however, including that the marketplace will not source more than 25% of its goods from a single vendor or group companies. Secondly, e-commerce entities providing marketplace will not directly or indirectly influence the sale price of goods and services and shall maintain a level playing field. The agency said that it expects the pace of store additions by offline retailers to be faster than the 10% estimated by the industry earlier. It did not specify the expected pace of growth, though. The new sourcing norms will impact e-marketplaces heavily dependent on group companies and restrict deep discounting that had become synonymous with the sector, the agency said in a statement. “The e-marketplace sector will undergo gradual transformation in the near term to a more sustainable business model and will focus more on optimising processes like supply chain, warehousing and overall fulfilment from a deep discounting for customer acquisition strategy,” said Amit Bhave, another director at CRISIL Ratings.
25% cap on sales per vendor for market place e-commerce player is reasonable: Govt official
Ruling out any relaxation in the 25 per cent cap on sales from a single seller for e-commerce market places, a top government official today said the limit is reasonable and fair. Permitting 100 per cent FDI in marketplace model of e-commerce, the Department of Industrial Policy and Promotion (DIPP) has put a condition that an e-commerce entity will not be permitted more than 25 per cent of the sales through its marketplace from one vendor or their group companies. Also read: Ecommerce FDI policy provides level-playing field: Retailers Some e-commerce players, industry experts as well as IT industry body Nasscom have said that restricting sales of a vendor to only 25 per cent of the sales in the marketplace may prove to be restrictive, more so if the vendor sells high value items. When asked, DIPP Secretary Ramesh Abhishek said: “25 per cent is a fair number because we want it to be a marketplace model and not inventory”. He said that if a firm is providing a marketplace model platform, sourcing 25 per cent from one vendor is reasonable and large number of sellers can sell through that platform. Nasscom has said that due to this cap the industry might face difficulties in case of sale of electronic items, where a vendor maybe offering exclusive access to certain items or discounts. Talking about the rider that e-commerce entities providing marketplace will not directly or indirectly influence the sale price of goods and services, he said that such players are not allowed to announce discounts. Announcing discounts by marketplace model players will infringe the law, he said. “Discounts can only be given by the owner of the goods or provider of services,” another official said. Some industry experts have said that the guidelines on pricing may impact big e-retailers.
Legal teams of ecommerce companies look for a way to continue with the discounts
Legal teams at online retail companies are poring over the government’s guidelines on ecommerce marketplaces to find a way in which price discountsa bedrock of their business modelcan still be offered to customers. On Tuesday the government said that online marketplaces cannot directly or indirectly influence the price at which merchants on their platforms sell goods, but this has raised the hackles of many who believe that such a stipulation constitutes needless interference. Experts said that while it may not be possible for companies to mount a challenge in court to the guidelines stifling discounts, they could seek clarity from the government about what kind of freebies are still allowed. Radhika Aggarwal, the chief business officer at ShopClues, which counts Tiger Global as an investor, said that the points which need clarity include the discounts which are given for using a specific bank’s card as well as coupon-generated discounts which are directed at customer acquisition through the affiliate network. “Our legal team is working on it and will reach out to the Department of Industrial Policy and Promotion for further clarity,” she said. Snapdeal, India’s largest online marketplace in terms of sellers transacting on its platform, said it is still going through the “fine print,” but declined to provide details. Flipkart and Amazon did not comment for this story. The guidelines restricting the online marketplaces from offering discounts to the Indian consumer could also have a negative effect on the soaring valuations that they have been commanding over the last three years. The rapid growth of India’s ecommerce industry–Morgan Stanley forecasts gross sales of about $119 billion by 2020–has been fuelled by billions poured into the sector by deep-pocketed investors. A large chunk of this money has been used on marketing and to fund discounts in order to attract consumers. “What we will have to wait and see is that if the discounts fall, will sellers transacting on these platforms see the same volume of sales?” asked Ashish Basil, partner for technology at EY. However, legal experts pointed out that the online marketplaces have little-to-no avenues to challenge the clarifications as it stands currently. “It can’t be challenged, and no court will sit in judgement over the government’s decision. This is not an act, but a policy, which is clarificatory in nature, and courts have limited powers of judicial review,” said Thomas Phillippe, associate partner at Khaitan & Co. “There will be parleys with the government as these companies try and figure out how not be in violation,” Phillippe said. The intention of the government in issuing the clarifications, according to legal experts, is two-fold – to avoid predatory pricing and respond to the complaints made against the ecommerce sector by the country’s brick-and-mortar retail players. “There are well-publicized complaints against the ecommerce, and these, at this point in time, seem to be a direct reaction to them,” said Rahul Matthan, a partner who specialises in technology at Bengaluru-based Trilegal. “Now there are conditions to comply with which did not exist earlier. But it’s not yet clear how they’re going to enforce them,” he said. In a stance contrary to peers, Alibaba Group-backed Paytm, however, backed the policy clarifications. “In terms of pricing, there has been a classic malpractice that has been carried out by other ecommerce companies by way of significantly discounting the products sold by their captive or exclusively affiliated sellers. This creates issues in the market as it cannibalises sales of offline retailers and creates problems for the brands as well,” said Sudhanshu Gupta, vice president at Paytm.
Kempegowda airport, a big draw for retailers
Kempegowda International Airport, Bengaluru, which witnessed a 25 per cent growth in traffic in 2015 with 18.1 million passengers, has witnessed record sales in 27 of its retail brand outlets. According to a spokesperson of Bangalore International Airport Ltd (BIAL), some of the outlets have become the number one or number two selling outlets in the country. The airport welcomed its 100 millionth passenger on March 18. Puducherry headquartered leather accessories brand Hidesign has its number one store in terms of sales and profitability at the airport; Fabindia’s store that sells only garments and accessories and no furniture, is the company’s number 1 store in terms of sales per sq metre; the Subway store is the largest selling outside the US, with 8,500 subs being sold per week; Shopper Stop’s fragrances store Arcelia is its number 1 store for fragrances in India beating its Mumbai store in Malad; and Levis records its highest sales in the country at the airport. Stating that Bengaluru is a very profitable city for retailers, Qubra Khan, Regional Head of Hidesign, told BusinessLine that the store in the Kempegowda International Airport notches an average selling price of ?5,000. “Bengaluru is an IT and Pharma hub and professionals at the manager and above levels who travel from these two sectors receive attractive travel allowances which they liberally spend on impulse buys at the airport. Then there are other factors such as, lower rental and staff costs in Bengaluru and the demographic profile of passengers from the city who are well traveled, discerning and cosmopolitan which contributes to this store becoming our number 1 store in the country in sales and profitability” she said. Handicraft and Heritage store, The Lotus House, which has 10 stores in airports and malls pan-India, has recorded its second highest sales in Kempegowda irport. Mala Paropkari, CFO, The Lotus House — Adaa Traders Pvt Ltd said “Our Mumbai airport store records the highest sales only because it attracts higher footfalls, if Bengaluru had higher footfalls, it would have been our number 1 store.” Café Coffee Day, which has 1,586 cafes, recorded its highest sales at the Bengaluru airport until last week. This week, one of its Delhi outlets has taken up the pole position, said the BIAL spokesperson. Jewellery brand C Krishniah Chetty has a presence, the popular Mysore Silks will soon open a store there and regional delicacies such as, bisibelebath, akki rotti and mysore pak are available at restaurants. “As the Gateway to South India, we try to see how the airports offering can be unique to the South Indian experience for every traveller, so that he or she can take back memories of South India in a new and refreshing way. Our approach is 85 per cent local” said GV Sanjay Reddy, Managing Director, BIAL.
Govt has no plans to divest stake in Air-India: Civil Aviation Secy
The Government has no plans to divest its stake in Air India, R.N. Choubey, Secretary, Civil Aviation, said on Friday. “Currently there is no move for divestment of Government stake in Air India,” Choubey told newspersons on the sidelines of the 29th anniversary of the Bureau of Civil Aviation Security. While sections in the Government are said to be in favour of divesting Air India so as to raise funds, there are others who feel that this is not the right time to divest a stake as the airline has reported losses for several years and the Government will not be able to get a good price for its asset. Asked to comment on the decision of domestic airlines to stop flights to four airports including Mysuru, the Secretary pointed out that there were different traffic demands during different times of the year. Bhavnagar, Porbandar and Nanded are the other airports to which domestic airlines have stopped operating flights in the summer schedule, which came into effect on March 27 this year. “In (the) winter schedule (there) is much higher demand while in the summer schedule demand is much lower. This is a normal phenomenal. It is not as if four airports have been taken off the air map. Many more airports will be added during the winter schedule. The regional connectivity scheme, which the Government is working on as part of the civil aviation policy, is meant to answer the issue,” Choubey said. The Secretary expressed confidence that the civil aviation policy will be taken to the Cabinet for its approval this month. The policy has been in the works since October last year.
IOC bids for fuel marketing and retail rights in Myanmar
State-run Indian Oil Corp (IOC) has bid for rights to import, store and distribute petroleum products in Myanmar. “We have put in a bid to enter fuel marketing and retail business in Myanmar,” a senior company official said. Myanma Petroleum Products Enterprise (MPPE) last year invited companies to form a joint venture for import, storage, distribution and sale of all petroleum products except liquefied petroleum gas (LPG) and liquefied natural gas (LNG). A separate tender for cooking gas LPG was floated. IOC had bid for that tender too, the official said. MPPE left the fuel distribution business when it was privatized in 2010, but is planning a re-entry into the fast-growing business sector that is marred by widespread dissatisfaction over service standards and fuel quality. In 2010, MPPE transferred 216 filling stations to private companies across the country but it still runs 12 pumps which supply fuel to state-owned vehicles. It also owns four main fuel terminals and 24 sub-fuel terminals. Around 70 private companies run the country’s 1163 petrol stations, but few have storage facilities or an import licence. MPPE now wants to tie up with foreign companies to expand the business and rehabilitate existing facilities. MPPE will hold 51 per cent of equity while the foreign company will hold the rest. The joint venture will be for a maximum of 30 years, extendable two 10-year periods. The official said IOC wants to use its just commissioned Paradip refinery in Odisha to ship fuel a short distance across the Bay of Bengal to get to Myanmar. Being the country’s largest fuel retailer, it also has experience of setting up fuel stations and managing logistics, which would be helpful in the nascent market. IOC is among the 11 to have bid for the separate tender to build a new liquefied petroleum gas (LPG) terminal and supply chain business for the distribution and marketing of the cooking and heating fuel. Winner of this tender will have to upgrade eight storage containers each with a capacity of 5550 metric tonnes of LPG for Ministry of Energy-owned No 1 Refinery (Thanlyin), and build a wharf with the capacity to load and unload 2000 metric tonnes of LPG. This is the first time foreign companies will be allowed to distribute LPG in Myanmar. Besides IOC, Singaporean firms Puma Energy Group and BB Energy (Asia) and a consortium of Japan’s Marubeni Corporation and Tokai Holdings has also bid.