IATA flags information gaps, seeks clarification on GST
Global airlines body International Air Transport Association (IATA) today sought clarifications on the tax treatment of air travels under Goods and Services Tax (GST) and claimed that there were “information gaps” regarding the implementation of the new tax regime. The aviation ministry, too, had earlier sought postponement of the GST implementation by two months on the ground that airlines needed more time to revamp their systems to comply with the new tax regime. In a u-turn, the ministry later said it was prepared for the GST roll out from the stipulated date — July 1. “There are still information gaps. We look forward to receiving the guidance notes to be provided by the GST Council,” said Country Director-India of the IATA Amitabh Khosla in a press statement. The body has sought clarification on “taxation treatment of continuous journeys” as the new taxation system is likely to make non-stop flights more expensive than stop-over flights. It has also expressed concerns about levying of the GST on air cargo. “We believe that the levying of GST on cargo export services by air contradicts standard GST principles as well as the treatment of such services under the service tax regime. Clarification would help align this with international standards and principles,” the statement added. Carriers, including Air India, have expressed concern over certain aspects of GST. Airline officials said making changes in the global ticket distribution system to ensure compliance with GST would take time. Airlines are also in a fix over the possibility of movement of stocks or equipment or aircraft parts being taxed under GST. Another sticking point is that input tax credit is only available for business class travel and not for economy class travel — a segment where there are more number of passengers.This would result in spike in operational costs for airlines. Input tax credit allows an entity to deduct the levies paid for the inputs while paying the taxes on the final output. Since GST is applicable for goods as well as services, input tax credit provides a leeway for the entities concerned. Shawn Williams Jersey
National no-fly list: Aviation ministry meeting inconclusive, no consensus on bringing crew, ground staff under ambit
A meeting on Wednesday on a national no-fly list for unruly passengers was inconclusive as top officials of the ministry of civil aviation debated whether airline crew and ground staff should also be covered in the list. A framework for a no-fly list for unruly passengers is in the last stages of being finalised and a top official had said that the rules would be made public in the first week of July. The government had last month made its draft rules on no-fly list public and invited stakeholders’ comments. As part of this exercise several people wrote to the ministry calling the proposed rules “lopsided” and demanded airlines should also be held equally accountable for misbehaviour of their crew. But the meeting today to finalise the rules failed to draw a consensus on expanding the scope of the national-no fly list and to apply it to the airline crew and ground staff as well, said a ministry official. Brett Kulak Authentic Jersey
Debt biggest challenge for Air India’s disinvestment
The Group of Ministers headed by Finance Minster Arun Jaitley will take a call on key issues that will make debt-laden Air India’s stake sale to private players more attractive. The Ministerial group will consider hiving off Air India’s assets and a portion of its non-aircraft debt to a special purpose vehicle (SPV) as a first step toward clearing up its balance sheet. “The Civil Aviation Ministry had proposed forming a SPV housing a substantial portion of its working capital loan and assets,” a senior ministry official said, on the condition of anonymity. “The sale of Air India’s prime real estate assets will help in meeting its liabilities,” the source said. Air India has a total debt of around ?52,000 crore which comprises of ?22,000 crore as aircraft loan and the rest as working capital loan and other liabilities. Some of its prime real estate properties include a building at Nariman Point and another at the old airport in Santa Cruz in Mumbai, freehold land in Chennai’s Anna Salai, an office in Baba Kharak Singh Marg in Connaught Place in New Delhi and freehold land and buildings in Hyderabad. However, the airline has mortgaged some of these as security with banks for availing loans. The Government may also separately go for strategic disinvestment of Air India’s three profit-making subsidiaries: its MRO unit Air India Engineering Services Limited, ground handling arm Air India Transport Services Limited and Air India Charters Limited. Brian O’Neill Womens Jersey
From Rs 4,000 cr to Rs 30,000 cr, Dharmendra Pradhan plans big business boost for Indraprastha Gas Limited
Union Minister of Petroleum and Natural Gas Dharmendra Pradhan has said that the government plans to increase Indraprastha Gas Limited’s (IGL) business from the current Rs 4000 crore to Rs 30,000 crore. The minister added that IGL caters to over 4 lakh commercial vehicles in Delhi, of these vehicles 80,000 are auto-rickshaws, 2.5 lakh taxis and 1 lakh commercial buses, this number does not include private vehicles which use Compressed Natural Gas (CNG). Recently the price of CNG was hiked by 35 paise per kg and the price of Piped Natural Gas (PNG) was hiked by 81 paise last month in the National Capital Region (NCR). IGL, which distributes both the gasses in the national capital has said that the prices were hiked due to rising operational costs. The Goods and Services Tax (GST) Council had decided to include natural gas, which would include both PNG and CNG, in the GST regime in order to provide some relief to the oil and gas sector. Goods and services used by the gas industry will be subject to GST, but the sale and supply of petroleum and gas will continue to attract earlier taxes like VAT and excise duty, PTI reported. Finance Minister Arun Jaitley has said, ”There is an agreement that natural gas can be included in the GST. As natural gas is an industrial product there won’t be any problem in its inclusion”. The GST Council is expected to meet on June 30, hours before the tax is rolled out. If natural gas is included in the GST then the tax paid on inputs and services used to produce the gas can be set off against taxes on its sale. This would reduce the losses of the industry by nearly 20 percent. Vernon Davis Jersey
Domestic airlines eye bigger share of foreign traffic
Unlike many countries, international air traffic to and from India continues to be dominated by foreign airlines, primarily from West Asia. But Indian carriers have been growing their share of the pie steadily. From about 30 per cent in FY14, the share of domestic airlines in India’s international traffic rose to 34 per cent in FY16 and further to 35 per cent in FY17, says a report by rating agency ICRA. This is a result of Indian carriers outperforming their international counterparts in traffic growth. For instance, in FY17, while overall traffic growth to and from India was 8.4 per cent, the domestic carriers grew their international traffic at a faster 11.8 per cent. While this is much slower than the about 22 per cent growth in domestic air traffic in FY17, the foreign traffic opportunity is also getting much attention from Indian carriers. More flights by both established players (Air India and Jet Airways) and relatively new entrants (IndiGo Airlines and SpiceJet) have aided the trend of growing market share on foreign routes. The Jet Airways and Air India groups have, over the years, built up significant share on the international routes (13.5-15.5 per cent), while IndiGo and SpiceJet are gradually building up their presence (about 3 per cent share each). More on the cards In the coming years, the share of domestic carriers in India’s international traffic is likely to grow. One, with the government replacing the 5/20 rule with the 0/20 rule last year, airlines such as Vistara and Air Asia India are ramping up their fleet to reach the 20 aircraft threshold that will let them fly foreign routes; there’s no more waiting to complete five years in domestic operations before going international. These airlines could start international flights in calendar 2018. GoAir, which already has more than 20 aircraft, has plans to start flying foreign routes in the current fiscal (FY18). Next, a fair portion of the large aircraft orders placed by many Indian carriers is likely to be placed on international routes. A recent ICICI Securities report says that in April-May 2017, the total capacity of IndiGo Airlines, which has the largest order book among domestic carriers, increased 21 per cent y-o-y. The chunk of this was deployed on international routes, with 17 per cent capacity growth in the domestic segment and 64 per cent in the international segment. In the case of Jet Airways, too, while domestic capacity increased 7 per cent y-o-y in April-May 2017, international capacity grew 10 per cent. GoAir, in the medium term, intends to deploy as much as 30 per cent of its expanded capacity on international routes. Profit pressure Are foreign routes of Indian carriers doing better than domestic ones? Not quite. Jet Airways gets more than half its revenue and profit from international operations, aided by the tie-up with its strategic investor Etihad Airways. But this segment did worse than the domestic business last year (FY17), with a sharper fall in operating profit and margins. Similarly, the international operations of IndiGo, which contribute about a tenth of its overall revenue and profit, did worse than the domestic business last year. Competition and higher costs, including fuel expense, which impacted the domestic business, took a bigger toll on the airlines’ international business. Despite this, domestic carriers are likely to step up on their international business. For one, margins in the international segment remain better than the domestic operations, aided by lower fuel costs. Also, airlines in India would prefer deploying a portion of the impending huge fleet capacity expansion on foreign routes, lest they drag down domestic fares. According to a report by ICRA, the current order book of Indian carriers is nearly double their current fleet size. Sam Shields Jersey
Power discoms’ subsidy dependence to rise to Rs 81,000 crore current fiscal: ICRA
The overall subsidy dependence of state-owned power distribution utilities (discoms) for the current financial year (2017-18) is estimated at Rs 81,000 crore, an increase of around 7-8 percent over the previous fiscal, research and ratings agency ICRA said today. “The increase in the subsidy requirement is predominantly driven by the subsidy and concessional tariff announcements in states during the pre-election period and continuation of subsidised nature of power tariff by state governments for certain consumer categories, even in case of upward revision in tariff by State Electricity Regulatory Commission (SERCs),” said Sabyasachi Majumdar, Group Head & Senior Vice President, ICRA. The overall subsidy requirement is further estimated to constitute around 17-18 per cent of the revenue requirement approved or estimated for the utilities for 2017-18, the agency said in a report. According to the assessment, Punjab and Madhya Pradesh are likely to witness a sharp increase in the subsidy support, of 29 percent and 49 percent respectively, in financial year 2017-2018, against the previous fiscal. Majumdar also said the increase in subsidy burden depends on the estimated higher level of consumption by the subsidised consumer categories. The dependence on subsidy support for discoms in states such as Andhra Pradesh, Bihar, Gujarat, Karnataka, Haryana, Rajasthan, Tamil Nadu and Telangana continues to be significant, ranging between 11-29 percent of the overall revenue requirement across the states, the report states. ICRA also said that in case schemes such as Direct Benefit Transfer (DBT), which is being proposed in Bihar, were to be implemented, the direct subsidy dependence on the state government would reduce for the discoms. Timeliness and adequacy of subsidy support from the respective state governments assumes critical significance from the discoms’ liquidity perspective. According to policy research firm Brookings India, the Indian power sector has been facing sharp increases in subsidies and cross-subsidies since the 1970s. “Part of this stems from the debate over whether electricity is a commodity or a public good; the former is amenable to markets, while the latter has been viewed as a basic, if not fundamental, right,” the report released in April said. Johnathan Joseph Authentic Jersey
India to launch new bidding mechanism for mega oil and gas auctions to be held next month
In a major attempt to boost India’s oil and gas production, the government will today simultaneously launch two key interventions – a revamped oil and gas bidding mechanism named Open Acreage Licensing Process (OALP) and the National Data Repository (NDR) for the first major oil field auctions to be held from July 1 under a new Hydrocarbon Exploration Licensing Policy (HELP). Both the initiatives will be launched by Finance Minister Arun Jaitely and petroleum minister Dharmendra Pradhan in a mega event here. The HELP regime is expected to cut down delays in development of blocks and legal disputes with companies because of its revenue share methodology, the ministry believes. The upcoming auctions under HELP will follow the just-concluded bidding for Discovered Small Fields (DSF) under which 31 oil blocks were awarded to around two dozen mostly small-sized firms. “Launch of National Data Repository (NDR) and Open Acreage Licensing (OAL) Process. Union Minister for Finance, Defence and Corporate Affairs Arun Jaitely and Minister of State for Petroleum and Natural Gas Dharmendra Pradhan will preside over the event,” the oil ministry said in a release. Under HELP, an upstream player will be allowed to explore both conventional and unconventional oil and gas resources including Coal Bed Methane, Shale gas and oil and gas hydrates under a single license. The new policy also stipulates a differential structure of royalty rates based on the depth of the field. The new policy and the upcoming auctions are part of the ministry’s effort to achieve the target of cutting down India’s import dependence for energy by 10 per cent by 2022 set by Prime Minister Narendra Modi. The new bidding mechanism to be launched today will allow interested firms to bid for blocks of their choice at any time of the year with the help of NDR — a comprehensive database of the country’s key sedimentary basins that will provide the bidders data on contract areas that will be available for auctioning. Under the new bidding mechanism an investor will be allowed to put forth an Expression of Interest for undertaking contracts under Petroleum Operations Contract (POC) or Reconnaissance Contract (RC). The investor will have the liberty to apply for such contracts bi-annually (1 July- 31 December and 1 Jan-30 June) and may also participate in rounds of auctions conducted by the regulator DGH over and above the applications made under OALP. Under RC, parties may carry out exploration operations for a given block for all types of hydrocarbons, except for coal bed methane for a contract period of two years with a provision for an extension up to one year. The reconnaissance licensee will have the right to license the data acquired for a period of 12 years. An investor applying for RC will only need to have positive net worth as qualification criteria in order to be eligible to bid for RC rounds, which essentially paves the way for new entrants to participate in these contracts. In the evaluation phase, the bidder scoring the highest (90) marks will be declared winner. The originator participating in the bidding process will get an originator incentive of 10 marks during the bid evaluation. The contractor who has won the RC bids and subsequently completed the RC term and wishes to migrate to petroleum operations contract will get the right of first refusal in the POC auctions if it meets all the qualification criteria. Accordingly, operator of RC will be, in the event of failing to win the POC bid, allowed to match the financial and technical bid of the highest bidder. Under POC, investors will be allowed to undertake exploration, development or production operations or any combination of such operations including construction, operation and maintenance of all necessary facilities and all other activities deemed to be necessary by the operator. The operator under POC will be allowed an initial exploration period of six years under a total contract period of 26 years. Unlike the DSF bidding round, where investors with no prior performance experience could also participate in production operation contracts, the investors participating in the HELP auctions to be held for POC under OALP bidding rounds will have to have a minimum operatorship experience of one year and acreage holding or production record as a pre-requisite under technical qualifications. During the evaluation phase, the bidder scoring the highest marks (95) will be declared the winner. The originator participating under the POC bidding will get an originator incentive of five marks during the bid evaluation. Cam Atkinson Jersey
Niti Aayog wants greater role for oil & natural gas board in upstream biz
The draft energy policy of the government has proposed enlarging the regulatory ambit of Petroleum and Natural Gas Regulatory Board (PNGRB). The policy draft proposes extending the remit of PNGRB over “selected statutory aspects of the upstream business, including HSE, data collection, joint development of reservoirs in adjacent blocks, sharing of infrastructure and promotion of acreages”. Currently, PNGRB regulates certain aspects of the downstream business only, while the upstream sector is monitored by the directorate general of hydrocarbons (DGH). Both these organisations are not fully empowered to regulate the sectors. The draft, however, says, “The contract administration role of production sharing contracts will remain with the DGH. But for that, the former will have to be equipped with adequate and competent resources.” India also aims to improve in several aspects, namely, competition between fuel sources on calorific parity basis (provided non-fuel economics is also neutral), ease of entry and exit for players, free consumer choice of vendor and market determined prices, among others says the draft. “However, many of these features evolve over time when conditions ripen.” The draft policy also lists several new regulatory interventions like separation of content and carriage in electricity, city gas, liquid fuels at select locations and the sharing of energy infrastructure by including storages and marketing infrastructure, ATF hydrants, offshore infrastructure, LNG terminals and aviation fuel infrastructure, among others within the definition of ‘common carriers’. Besides these, the policy also made a case for granting choice of service provider for LPG, kerosene and electricity, among others. Moreover, data sharing especially in the area of oil and gas exploration was deemed important. “The existing regulations need to be expanded to address the needs of our energy market to usher in strong market framework. The existing regulators will provide for or clarify through regulations unbundling between gas transporters and marketers, overlap between jurisdictions relating to competition issues, adequate returns to gas pipeline developers in the initial years when the throughput is minuscule, induction of latest technology, robust data collection and dissemination, and health, safety and environment (HSE).” Niti Aayog is preparing the national energy policy, the draft of which has been unveiled for public comments. According to Niti Aayog, the four key objectives of energy policy are access at affordable prices, improved security and independence, greater sustainability and economic growth. According to the draft, unlike other mature energy markets across the globe, the Indian energy regulators must undertake developmental role to help bring in more players, enhance availability, contribute to reducing entry costs and help different segments of the business integrate well. Several of these areas are already included in the regulatory statutes with poor implementation. “PNGRB is one example that has not been able to succeed in the rapid roll-out of CGD networks. The Indian energy sector has higher expectations from regulators as compared to the developed energy markets of the world where regulation is gradually giving way to open markets,” says the draft. Yasiel Puig Jersey
Indian renewable market to witness strong growth: Moody’s
As India is moving towards meeting its commitments under the Paris agreement on climate change, its renewable energy market is likely to witness a strong growth over many years, says Moody’s Investors Service. “However, renewable energy projects face challenges related to the weak credit quality of offtakers, an evolving regulatory framework, as well as financing and execution risks,” Moody’s vice-president and senior analyst Abhishek Tyagi said in a statement issued here. According to the rating agency, India’s emission reduction commitments under the Paris agreement will lead to a sharp rise in renewable energy capacity. India aims to achieve 40 per cent of cumulative installed capacity through non-fossil fuel sources by 2030 from the current 30 per cent and also plans to grow its renewable energy capacity to 175 GW by 2022 from the current 57GW. “Such growth will be driven by the public and private sector. However, the key offtakers for most renewable projects are state-owned distribution companies, and these firms typically demonstrate weak financial profiles. “This situation poses a key challenge for developers. And, while there is no history of defaults under power purchase agreements, payment delays are quite common,” he said. Moody’s also points out that the evolving policy framework for renewables presents a risk for renewable projects. “Adherence to renewable purchase obligations has been limited, leading to lower demand for renewable energy. Nevertheless, the feed-in-tariff and competitive bidding guidelines for wind and solar projects are well established and improve revenue visibility over the life of purchase power agreements,” the agency noted. It further said the rise in renewable energy capacity will bring execution challenges, including land acquisition, establishing resource quality, grid connectivity and availability. On the financing of renewable energy projects, India will need to invest close to USD 150 billion to meet its 2022 renewable energy targets. Since domestic banks are constrained in their lending to renewable projects, foreign capital will play an important role. However, foreign currency financing is constrained by the limited hedging products available to fully cover the rupee currency risk of purchase power agreements, it said. Zach Cunningham Authentic Jersey
LPG sales jump by record 9.8 pc on Ujjwala push
LPG sales have jumped by 9.8 per cent in the fiscal year ended March 31 after the government gave a record number of cooking gas connections, most of them to poor households. Public sector fuel retailers sold 18.9 million tons of packed domestic LPG — the fuel that is sold to consumers in cylinders — during 2016-17. “Packed LPG growth in 2015-16 was 7.1 per cent and in 2016-17 it was 9.8 per cent,” a senior oil ministry official said. The growth rate assumes significance considering that petroleum product sales have stagnated at 4-6 per cent. India consumed 5.2 per cent more petroleum products like petrol, diesel, LPG and jet fuel, in 2016-17 at 194.2 million tons. “LPG is the highest grosser. As many as 111.3 crore cylinders were sold in 2016-17,” the official said. State-owned Indian Oil Corp (IOC), Bharat Petroleum Corp (BPCL) and Hindustan Petroleum Corp (HPCL) together have 23.71 crore LPG customers registered with them out of which 23.46 crore customers are domestic users. Of these only 19.88 crore are active users. The official said about 3.32 crore new domestic LPG connections were issued during 2016-17, including two crore under Pradhan Mantri Ujjwala Yojana (PMUY). Under the PMUY, the government is giving free LPG connections to poor households with a view to weave them away from polluting fuel like firewood. The PMUY has helped increase LPG coverage to 72.8 per cent of the population, up from around 50 per cent three years ago. The official said there may be few states where the LPG refil purchase has been below the national average of 4-5 cylinders a year but overall there has been a tremendous growth in LPG consumption. “Bihar recorded the highest growth at 22.7 per cent, followed by Chattisgarh at 17.6 per cent, Jharkhand at 16.7 per cent, West Bengal at 15.9 per cent and Uttar Pradesh with 15 per cent growth rate,” he said. States which do not have abandunt alternate cooking fuel like forest wood, have shown greater ease in switching over to LPG usage. Deshazor Everett Jersey