Airlines may hit air pocket on proposed accounting norms
Domestic airlines will see “varying effects” on their profits in the coming years as they will be required to show all aircraft leases on their balance sheets under a new accounting standard, according to experts. Leasing of aircraft rather than outright purchase is a common practice in the airlines industry worldwide. Once the new accounting standard is in place, the carriers would have to show all such leases on their respective balance sheets which would result in “substantial new assets and liabilities”. The Indian Accounting Standard 116 (Ind AS 116) — which sets out the principles for recognition, presentation and disclosure of leases — is proposed to be effective from April 2019. Implementation of this standard is expected to have significant impact on the financials of airlines. At present, many airlines keep the leasing expenses off the balance sheet and under the new standard, all leasing contracts would be reflected in it. Besides, experts opined that it would make aircraft sale and lease back practice less attractive as airlines would have to recognise assets and liabilities arising from the lease back. “Airlines industry will now be required to recognise all the leases on the balance sheet. As a result, airlines’ industry will account for substantial new assets and liabilities. “… the standard (Ind AS 116) is expected to have varying effects on each airline entity based on number of aircrafts taken on leases by that particular entity,” ICAI President Nilesh Shivji Vikamsey told PTI. Most carriers are already seeing wafer thin margins as deeply discounted fares and rise in aviation fuel prices along with staff costs take a toll on their overall profitability. Against this backdrop, the new accounting standard is likely to further trim their bottomline on account of leasing costs. The objective of the Ind AS 116 is to ensure that lessees and lessors provide relevant information in a manner that faithfully represents those transactions, the ICAI (Institute of Chartered Accountants of India) said in its draft exposure on the standard. Ind AS 116 is the equivalent of IFRS (International Financial Reporting Standards) 116. The standard would impact the reported assets and liabilities of airline industry depending on the nature and significance of former off balance sheet leases, Vikamsey said in a detailed response on queries related to Ind AS 116. Those airlines having almost all the aircraft on leases are expected to change significantly in contrast to others having few planes on lease, he added. Pratiq Shah, Partner at consultancy Deloitte Haskins & Sells LLP, told PTI that the standard can be expected to have a significant impact, particularly for entities that have previously kept a large portion of their financing off-balance sheet in the form of operating leases. Under this standard, the operating lease-style accounting treatment would be available only for short-term leases or those that have less than 12 months tenure and those for low value assets. To a query on if there would be an immediate impact on the financials of Indian carriers after Ind AS 116 implementation, he said those airlines that have chosen the option to lease aircraft with an intention to keep them off- balance sheet would see a change in the financial statements. When asked about the possible impact of Ind AS 116 on its balance sheet, a senior Air India official said all future lease rentals would have to be shown as liabilities and the aircraft as assets. Ryan Grant Jersey
Cut power losses to below 10 per cent in 6 months, Centre tells states
The Union power ministry has asked states to slash electricity losses due to theft and technical reasons to below 10% within six months, an ambitious target given that some towns in Uttar Pradesh, Jharkhand and Bihar lose up to 90% of power. The target was put before the states in a review, planning and monitoring meeting held on July 22 by Union power minister Piyush Goyal with power secretaries of states. About 4,041 towns are being targeted under the proposal, officials said. Cities such as Ahmedabad and Visakhapatnam would find it easier to meet the target since they lose close to 10% power due to theft and technical reasons, but the move is being resisted by states such as Jharkhand, Uttar Pradesh and Bihar where pilferage and technical problems are a huge challenge. A senior government official said while the physical and commercial losses can be curbed by the state-owned discoms by raising billing-collection efficiency and curbing power thefts, the technical losses would require substantial investments in technology upgradation. He said the Centre is supporting the technology upgradation in distribution sector through the Integrated Power Development Scheme (IPDS) for strengthening of sub-transmission and distribution networks in the urban areas, metering of distribution transformers, feeders, consumers in the urban areas and IT enablement of distribution sector. Data available on the Centre’s Urja-India app showed that there are 201 towns where the percentage of power loss and thefts is below 10%. Another 200 towns faced power losses of 1o-15% while there were about 220 towns that had losses in the range of 15-20%. About 200 towns faced losses in the range of 40-90%. The power ministry last week said that the national aggregate technical and commercial losses in states reduced to 20% in 2016-17 from 21% in FY16, 25% in FY15, and 23% in FY14. The states participating in the scheme and performing as per operational milestones in the memorandums of understanding are proposed to be given additional funding through Deendayal Upadhyaya Gram Jyoti Yojana, IPDS, Power Sector Development Fund and other such schemes. Shaun Alexander Authentic Jersey
12 National Highways to double up as emergency landing airstrips
The Indian Air force (IAF) has cleared 12 National Highways (NHs) as emergency landing airstrips that will enable rescue operation teams to reach affected areas easily, an official responsible for executing the project said. Although there was initially a proposal to develop a total of 21 NHs into airstrips, for now 12 highways have been cleared, with three of those connecting Odisha, Jharkhand and Chhattisgarh — all Maoist-affected areas, which also witness vagaries of nature like floods and cyclones almost every year. “The IAF has given clearance to 12 NHs to be developed into emergency landing airstrips out of the total 21. However, on the remaining NHs, discussions and testing are on and soon they too are likely to be cleared by the IAF,” a senior government official, requesting anonymity, told IANS. Despite repeated attempts, the IAF had no comment to offer on the project and on related issues like the facilities to be put in place if the highways are to be used in times of emergencies. To start with, the thickness of tar will be increased and highways will be made strong enough for aircraft to land. “The highways will be open for public during normal times, but in case there is an emergency, then normal traffic will be blocked and the stretch will be used for aircraft landing. Also, alternate ways will be created for the normal traffic flow during emergencies,” said the official. According to the Ministry of Road, Transport, Highways and Shipping (MoRTH), the National Highways Authority of India (NHAI) has been chosen as the executing agency. “In all, 17 highways were assigned to the NHAI, but after a joint survey, we found that airstrips can be developed only on 12 of the NHs. The BoQ (bill of quantities) has been prepared and we are waiting for approval from the competent authority on when to start,” NHAI Chairman Deepak Kumar told IANS. Asked specifically how long it would take for the work to commence, Kumar, who was appointed recently to head the national road construction agency, said: “The work is expected to start in the next three-four months.” One major reason behind the initiative is to strategically operate in places prone to natural calamities and where relief work cannot be carried out without the help of choppers or aircraft. Among the 12 NHs cleared for being developed into airstrips are: Jamshedpur-Balasore highway and Chattarpur-Digha highway — both touching Odisha –, the Kishanganj-Islampur highway in Bihar, Delhi-Moradabad highway in Delhi-Uttar Pradesh, Bijbehara-Chinar Bagh highway in Jammu and Kashmir, Rampur-Kathgodam highway in Uttarakhand, Lucknow-Varanasi highway in Uttar Pradesh, Dwarka-Maliya highway in Gujarat, Kharagpur-Keonjhar highway in West Bengal and Mohanbari-Tinsukia highway in Assam. Others include Vijaywada-Rajahmundry highway in Andhra Pradesh, Chennai-Puducherry highway in Tamil Nadu and Phalodi-Jaisalmer highway in Rajasthan. Elaborating on the planning of the entire project, the official said that the selection of highways had been done in a way that the entire country could be covered during natural calamities. “The highways chosen in Odisha are connected to Chhattisgarh and Jharkhand. Planning is such that within short duration, aircraft will be ready to land and the soldiers can be deployed to help during a natural calamity,” said the official, adding that such initiatives were in existence and had been tried during World War II. In 2016, Minister of Road, Transport, Highways and Shipping Nitin Gadkari had announced the project and the formation of a committee to come up with specifications for highway stretches that can double up as airstrips. The committee will look into details like feasibility of the stretches, their length and breadth, among other issues. Walter Payton Authentic Jersey
Traffic growth: Rs 50,000 crore a year required for extra laning
The present rate of vehicle growth will require construction of an additional lane on highways every year, which will cost government about Rs 50,000 crore, said road transport and highways minister Nitin Gadkari quoting a study done by his ministry. “While we are expanding the highway network and increasing the length by converting more state highways to national highways the moot question is whether it’s sustainable. We have to find solutions and graduate from building roads to improving mobility,” Gadkari said citing how roads won’t be enough unless the government finds ways to lessen use of private vehicles. At present, the annual increase in registration of vehicles is over 10%. For several years Indian policy-makers have been talking about the need to reduce the load of private vehicles on roads and to put in place mass rapid transit and robust public transport systems. “We have to bring attractive public transport and other modes of shared transport system even on highway stretches, particularly between cities,” Gadkari said adding that luxury double decker buses could be one such options. The study that Gadkari referred to has mentioned how a four-lane highway in Japan is adequate to manage 80,000 vehicles a day while in India a similar road stretch gets choked with only 20,000 vehicles. “This simply shows how we need to make our roads efficient. But we can’t achieve the performance at par with roads in Japan if all types of vehicles besides cycles and cycle-rickshaws use the same space,” said an official. Considering this, the future expansion of highways will be based on making stretches access controlled so that slow moving traffic is not allowed to enter such stretches. “There will be service roads for the slow moving traffic. That will reduce congestion and road crashes as well,” a ministry official said. The ministry has pushed the introduction of new technology driven transport systems, which are before the government think tank Niti Aayog. Marc Staal Authentic Jersey
Cut power losses to below 10 per cent in 6 months, Centre tells states
The Union power ministry has asked states to slash electricity losses due to theft and technical reasons to below 10% within six months, an ambitious target given that some towns in Uttar Pradesh, Jharkhand and Bihar lose up to 90% of power. The target was put before the states in a review, planning and monitoring meeting held on July 22 by Union power minister Piyush Goyal with power secretaries of states. About 4,041 towns are being targeted under the proposal, officials said. Cities such as Ahmedabad and Visakhapatnam would find it easier to meet the target since they lose close to 10% power due to theft and technical reasons, but the move is being resisted by states such as Jharkhand, Uttar Pradesh and Bihar where pilferage and technical problems are a huge challenge. A senior government official said while the physical and commercial losses can be curbed by the state-owned discoms by raising billing-collection efficiency and curbing power thefts, the technical losses would require substantial investments in technology upgradation. He said the Centre is supporting the technology upgradation in distribution sector through the Integrated Power Development Scheme (IPDS) for strengthening of sub-transmission and distribution networks in the urban areas, metering of distribution transformers, feeders, consumers in the urban areas and IT enablement of distribution sector. Data available on the Centre’s Urja-India app showed that there are 201 towns where the percentage of power loss and thefts is below 10%. Another 200 towns faced power losses of 1o-15% while there were about 220 towns that had losses in the range of 15-20%. About 200 towns faced losses in the range of 40-90%. The power ministry last week said that the national aggregate technical and commercial losses in states reduced to 20% in 2016-17 from 21% in FY16, 25% in FY15, and 23% in FY14. The states participating in the scheme and performing as per operational milestones in the memorandums of understanding are proposed to be given additional funding through Deendayal Upadhyaya Gram Jyoti Yojana, IPDS, Power Sector Development Fund and other such schemes. Brent Urban Jersey
Rajasthan govt approves new policy for power connections to small and marginal farmers
Rajasthan government has approved agriculture connection policy-2017 for power connections to small and marginal farmers. As per the new provisions, small and marginal farmers belonging to below poverty line (BPL) category will get priority over others in receiving agriculture connections of 5 horsepower. Farmers living on the periphery of Indira Gandhi Canal Project who are affected due to the problem of waterlogged areas will also get the same benefit. Earlier, famers in BPL category along with those living near Indira Gandhi Canal Project were not able to avail connections on a priority basis. Under the new policy, power connections that were cut off can be reconnected for which interest rates on amount paid has been slashed from 16% to 12% yearly. The new policy will only be applicable on connections for five-star rated pump sets approved by bureau of energy efficiency and upto 20 horsepower. Also, those replacing their standard motors with five-star rated pump sets will receive subsidy of Rs 750 per horsepower from the government. After the notification of the policy, farmers who have received subsidy under solar pump sets will not be able to avail second agriculture connection in general category. For them, government will launch a separate scheme. These applicants will have to pay cost of sub-station but their tariff rates would be same as normal connections. In the new policy, government has relaxed provisions for martyrs’ families. They can apply for agricultural connections any time. Earlier, it was mandatory to apply within twelve years of the death or within two years of getting ownership of land. The new policy also says that farmers can revive their connections after paying Rs 500 if the demand note for connection was issued within five years. The farmers can also erect electric lines if the option was given during the deposit of demand draft. Chris Hogan Womens Jersey
Green energy sops may end in five years
The government plans to gradually withdraw all the incentives for the renewable energy sector over the next five years, a move that may face stiff opposition from an industry that is to see significant growth in the coming years. “There will be no targeting of renewable energy after 2022, and we will allow markets to determine the prices as well as kind of support the sector needs to sustain and integrate itself with the mainstream,” a senior government official told ET. The move is in line with the holistic draft National Energy Policy (NEP) drawn up by official think tank Niti Aayog, which has reasoned that the sector does not need any handholding after 2022, the official said. Reasoning the move, the official said a base load is needed to support the generation of renewables. “This comes at a cost of traditional electricity which therefore gets expensive.” NEP, which is to replaced Integrated Energy Policy of the previous UPA regime, aims to provide levelplaying field for all sectors and hence is batting for withdrawal of all kinds of support to the renewables also. According to Niti Aayog’s draft NEP, the sharp reduction in tariffs received in bids for solar and wind power is a reflection that these technologies are now exposed to market discipline and that there is a need to now address other lagging renewable sources such as hydro and biomass. “Therefore, the NEP proposes gradual withdrawal of the provisions of ‘must-run’ status and other supports such as non-levy of inter-state transmission charges,” the draft policy said. Under ‘must run’ status, any power generated by wind and solar power plants should always be accepted by state power distribution companies. “It is envisaged that as consumers become agnostic to the source of power, renewable energy will soon blend with conventional power and markets will determine dispatch rather than policy levers,” the policy paper said. However, companies operating in the sector are yet to firm up their views on whether this gradual withdrawal of benefits to the sector will help them or not. Doug Baldwin Womens Jersey
Major relief for solar power developers: Projects deadline extended
The government has granted major relief to solar power developers, allowing deadlines for project development to be extended in cases where there were delays caused by circumstances beyond their control. Developers had raised an alarm over a letter from the Ministry of New and Renewable Energy (MNRE) this month directing all states to strictly enforce deadlines for solar projects, eschewing extensions, as reported by ET on July 18. The ministry has now sent another letter that takes into account the concerns raised. “If there are delays of any kind on the part of the state government … like land allotment, transmission or evacuation facilities, connectivity permission or force majeure, the competent authority in the state may consider providing extension of the time duration,” the letter dated July 28 said. Both letters are written by Dilip Nigam, an adviser to the National Solar Mission at the ministry. Solar tariffs have fallen dramatically in the last two years, from around Rs 7-8 per unit in mid-2015 to aroundRs 2.50-3.50 at present, mainly due to a steep decline in the cost of solar cells and modules caused by global overproduction, especially in China. The MNRE was concerned that solar developers who had won projects earlier at relatively higher tariffs — when equipment costs were also high — might delay their purchase of solar equipment to benefit from falling prices and thereby reap windfall profits. “One of the reasons for falling tariffs is lowering of prices of solar cells/modules internationally,” the first letter, dated July 3, said. “Falling prices may give undue benefits to developers at the cost of the government if project duration is extended… It is important that already awarded projects are completed on time.” Power purchase agreements (PPAs) usually include severe penalties for failing to complete a project on time, but these are frequently not enforced and developers given extensions should they ask for them. The letter evoked strong protests from developers who pointed out that project delays were often due to lapses on the part of the state government or the concerned power distribution company. They even feared the letter could be used by state discoms to renegotiate PPAs, citing the fall in equipment prices. The second letter has made it clear that if a state government was culpable for any delays, the developer should not be made to pay for it. “It is clarified that the ministry had requested not to give time extension (only) if all the obligations are fulfilled by the concerned state government in a project,” it said.
Farzad B gas field row: Not obligated to give deal to India, says Iran
Despite India willing to invest as much as $11 billion to develop Iran’s Farzad B gas field, the war of words between the two countries has only intensified with Tehran now saying that it is under no obligation to award the contract to India. Iran has also made light of India’s threat to import less crude oil from it, with its Parliament Energy Commission chief saying Iran could find other customers for its oil. In May, Iran signed a basic agreement with Russia’s Gazprom for development of the gas field which was discovered by a consortium of Indian state-run companies. This was seen as a retaliation against what Iran saw as a threat from India to cut purchase of Iranian oil if the commercial contract for Farzad B didn’t happen. India officially said last month that it wants Tehran to reciprocate the faith shown by New Delhi in it as reflected in India’s decision to buy substantial crude from Iran even when it faced international sanctions. This was followed by a fresh offer earlier this month to invest $11 billion for development of the gas field. Iranian lawmaker and spokesperson of Iran’s Majlis Energy Commission Asadollah Gharekhani said last week that while India had been allowed to conduct technical surveys on Farzad B, giving India development rights was never a part of any agreement. “In the past, it was decided that Iran and India jointly carry out (feasibility) studies on the Farzad B oil field. The studies have been conducted and have finished. However, no decision was made that would suggest the project to develop the field should necessarily be contracted out to India,” Gharekhani was quoted as having told Iranian government’s ICANA news agency. “Under equal circumstances, this company (Indian consortium) could take priority. However, if there is a difference between the Indian company and other firms in terms of technology, technical knowhow and investment, Iran will, based on the independence and freedom that is has, choose the company which would best serve the country’s national interests,” he added. On India’s decision to buy less crude from Iran, the official said Iran had actually suffered losses by allowing New Delhi to pay for the purchase in Indian rupees. India and Iran have failed to finalise a commercial contract for Farzad despite the optimism expressed by PM Narendra Modi and President Hassan Rouhani for the same when they met in Tehran last year. Calle Rosen Womens Jersey
Govt in talks to revise policy on petroleum industrial regions
With some of the petrochemical industrial regions such as Paradip and Tamil Nadu not generating expected results unlike Dahej in Gujarat, the Government of India is in discussions of revising the Petroleum, Chemicals and Petrochemicals Industrial Region (PCPIR) policy. Speaking at the sixth Petrochemicals Conclave at Gandhinagar, Rajeev Kapoor, secretary, department of chemicals and petrochemicals, Government of India said, “There is expected to be a shortage of petrochemical intermediates by 20 million tonnes by 2025. There is also lack of R&D and innovation in the sector. Except for Dahej, nothing much has happened in Paradip and Tamil Nadu PCPIRs. Hence, there is a need to relook at the policy for revision and the government is in discussions for the same.” Minister of State for Chemicals and Fertilizers, Mansukh Mandaviya said that the petrochemical complexes need strengthening in order to boost country’s exports. “Chemical and petrochemical imports today stand at 10 million metric tonnes which is set to grow to 46 million metric tonnes by 2030. Import substitution of certain petrochemicals is the key requirement for sustainable development of the industry in the next 5-10 years. We have to look at ways to reverse the trend for India to become a net exporter of the same,” said Mandaviya. Mandaviya urged the petrochemicals industry to focus on effective recycling and management of plastic waste for building a positive perception on the use of plastics. Union minister for petroleum and natural gas, Dharmendra Pradhan said that setting up of petrochemical clusters could help boost both consumption and marketing of end products. “Currently, the petrochemicals value chain is spread across various regions which could be brought together into clusters to boost consumption and marketing. Already, with increase in the per capita income and discretionary spending, there has been a steady change in spending patterns, from products made of metals to those made of fibres and plastics, which are both economical and long-lasting,” Pradhan added. While India’s per capita consumption of plastics at 10 kg per person is lower than the global average of 32 kg, the country’s aggregated demand for petrochemicals stands at 38 million metric tonnes per annum (mmtpa), Pradhan. Between 2000 and 2016, India grew at nearly 14 per cent in polymers to stand at a 10 mmtpa. The current petrochemicals market in India is estimated to be about 30 mmtpa while the average domestic per capita consumption of petrochemicals is about 22 kg per person. The total petrochemicals market in India is currently valued at approximately $ 50 billion. Driven by the rise in polymer demand, it is expected to grow at the rate of nine per cent annually to reach 40 mmtpa in consumption and $65-70 billion in revenues by FY 2019-20. Out of India’s petrochemicals demand of 30 mmtpa, the demand for polyolefins, used in industrial packaging and household plastic products, is estimated to be around 10 mmt. Expected to grow at a CAGR of almost 8-9 per cent, polyolefin demand in India is expected to reach 22 mmt by 2026. Overall, the petrochemicals market in India is expected to grow at a CAGR of 1.5 times that of GDP in the next 10 years. Meanwhile, speaking at the conclave, Nitin Patel, deputy chief minister of Gujarat said that petrochemicals had a big share in making Gujarat a model state with a high growth rate. “The annual turnover of the petrochemicals industry in Gujarat is Rs 5000 billion, supporting about 500 big industries, 1,600 medium and many small industries,” Patel added. Ryan Kerrigan Womens Jersey