Clean energy cess collections rise, but spending low
The government’s collections from the clean environment cess imposed on coal, lignite and peat in 2010 are likely to touch Rs 54,336 crore by March, according to a finance ministry document. However, only Rs 9,021 crore, or about 17% of the expected total, has been spent through the National Clean Energy Fund (NCEF) to which Rs 25,810 crore has been transferred from the amount collected. The spending falls short of the estimated Rs 34,811 crore needed to subsidise some 55 renewable energy projects, as recommended by an inter-ministerial group. Funds from the cess are routed through the NCEF to finance and promote clean energy initiatives and research & development. The inter-ministerial group decides how the money is to be used. According to a government statement, about Rs 9,021 crore has been spent through NCEF although Rs 17,500 crore has been allocated to various ministries over the years. About Rs 12,400 crore was allotted to the Ministry of New & Renewable Energy, while some Rs 3,500 crore has provided to the Ministry of Water Resources, River Development and Ganga Rejuvenation. The government introduced the clean energy cess in 2010 with a levy of Rs 50 on every tonne of coal sold. This was increased to Rs 100 per tonne in 201415, Rs 200 per tonne in 2015-16 and Rs 400 per tonne this financial year. The government collec ted Rs 12,600 crore from the cess in 2015-16 and is expected to garner Rs 26,148 crore in 2016-17. An industry executive said with renewable energy costs declining, there may no longer be a need for subsidy , known as viability gap funding, for such projects. The government had also planned to offer in centives to power distribution companies to purchase solar and wind energy . “However, a very small portion of the fund found its way into funding these projects. Now with tariffs for solar and wind power generation declining, the requirement of viability gap funding for these projects are losing relevance,” said the senior renewable energy industry executive. “The government, therefore, needs to develop suitable mechanisms to encourage discoms to buy renewable power and consider a mechanism for making timely payments,” he said. Procurement-based incentives can help bridge the difference between the cost of renewable power generation and average power purchase cost, said another executive. Josh Ferguson Authentic Jersey
Lufthansa has no plans to buy equity in Indian carriers, says CEO Spohr
German airline Lufthansa will soon start operating the Airbus A-350, the latest aircraft in its fleet, between Mumbai and Munich, Carsten Spohr, Chairman of the Executive Board and Chief Executive Officer, Lufthansa Group said on Wednesday. On February 11 this year, Delhi became the first destination in Lufthansa’s global network to which the A-350 was deployed when its maiden flight landed from Munich. The Airbus A-350 is considered one of the most modern long-haul aircraft as its average jet fuel consumption of 2.9 litres per passenger per 100 km means 25 per cent less fuel than any other comparable aircraft type, airline officials said. Addressing a press conference here, Spohr also announced that Brussels Airlines will start operating between Brussels and Mumbai. Lufthansa recently acquired stake in Brussels Airlines. Besides, Lufthansa will also christen one of its Airbus A-380 aircraft ‘Delhi’ and increase the frequency of flights between Pune and Germany, Spohr announced. The start of the Brussels Airlines flight to Mumbai and the naming of the Airbus A-380 after Delhi are expected in March this year. “The first thing that we do after buying Brussels Airlines is to help them fly to India,” Spohr announced, adding that naming one of the few Airbus A-380s that Lufthansa has as ‘Delhi’ points to the Capital as a hub and India as a market for the airline. “At this point we are not approaching any other airline to enter the Star Alliance,” the CEO said in response to a question on whether he would be talking to any Indian airline about handholding it to enter the Star Alliance, adding that he would be meeting with his counterpart in AI on Thursday to look at ways of “intensifying” the Indian carrier’s membership in the Alliance. The CEO ruled out the Lufthansa Group buying equity in an Indian airline saying that the focus of the German company was on airlines in Europe and that this would continue. Asked whether the recent three-year tie-up finalised between Etihad and Lufthansa will impact the Indian market, Spohr said, “Etihad group is an investor in Jet Airways so when we look to intensify our cooperation with Etihad we will also look to enhancing the bilateral relationship between Jet Airways and Lufthansa, which already exists but could offer room for more.” Spohr also announced that Lufthansa’s recently launched international low-cost airline will operate to India. Although he declined to specify by when this would happen, he did indicate the possibility of the low-cost airline looking at flights between Germany and Goa. “Germans love to go to Goa. There is no direct service. So we can look at these kinds of destinations,” he said. Lawson Crouse Jersey
Cab, auto-rickshaw drivers on strike meet Gadkari, demand government-run app
Striking taxi and auto-rickshaw drivers on Tuesday met Union minister for road transport Nitin Gadkari and demanded a government-run cab-hailing app on the lines of Ola and Uber. A delegation representing taxi and autorickshaw drivers told Gadkari their problems and urged him to get a mobile application developed to end the monopoly of private cab services. They alleged that app-based taxi services pay very less amount to the drivers. “The minister has promised us his support and expressed his desire to work for the benefit of the drivers… Tomorrow we will meet the senior officials of the ministry to discuss it in detail,” Delhi Taxi Tourist Transporters Association (DTTTA) president Sanjay Samra said. In their memorandum to the minister, the drivers alleged Ola and Uber were offering low fares and asked Gadkari to discontinue Ola and Uber cab services in the country. “They announced that the drivers will get Rs 6 per kilometre and asked for 25% in commission from the drivers. At this rate many Ola and Uber drivers are unable to earn enough to tend to daily needs,” Samrat added. The drivers launched a strike on February 10, much to the pains of the commuters who rely of app-based taxi services. Dion Phaneuf Authentic Jersey
CENTRE TAKES THE HIGH ROAD, RESCUES PRR
The long-drawn debate between the Bangalore Development Authority (BDA) and National Highways Authority of India (NHAI) over who would build the Peripheral Ring Road (PRR) around Bengaluru has finally come to an end. The Centre has agreed to take up the project under the Bharat Mala Pariyojana. Union Minister of State for Road Transport and Highways Pon Radhakrishnan confirmed the development and added that the NHAI was preparing the detailed project report. The 65-km-long PRR stretch from Tumkur Road to Hosur Road — which looks to ease the load off the Outer Ring Road — will now be funded and built by NHAI. Around 1,810 acres have already been earmarked by the BDA for the project. A source said the NHAI would require around Rs 41,000 crore for the project. Of this, Rs 25,000 crore would be for land acquisition and compensation (according to the new Act), while the construction will cost Rs 16,000 crore. Now that ownership is out of the way, the focus is on the compensation package. A source in NHAI said they were looking into various models to take up the project. They can either take up the project on the usual PPP model or the hybrid annuity model (the Bengaluru-Mysuru six-lane project will be taken up under this mode). Under this model, the concessionaire would fund 60 per cent of the project cost while the rest would be borne by the Centre. The Centre hopes that by doing so, it can attract a number of bidders. The NHAI officials in Bengaluru said the current project details were being worked out in New Delhi. For years, the PRR project was like a game of football between NHAI and BDA. As the ORR was saturated, the state government, headed by the then Chief Minister SM Krishna, had mooted PRR to be constructed by the BDA. Later, however, NHAI officials had asked the state government to hand over the project. But during the time, the BDA had intervened and took over for the implementation which never took off. Then, the BDA said NHAI would construct it and the latter said the BDA had taken over the project. Only during the last meeting, it was decided at the Chief Secretary level that the project will be handed over to the Centre. PC Mohan (MP, Bengaluru Central) told Mirror that he had taken up the issue in parliament, and it was heard. “It’s a good sign for Benglauru. PRR is a much-needed project… we need to connect it from one point to another point. PRR will ease the pressure on city’s roads. Vehicles entering the city from Tumkuru side will have direct exit towards Tamil Nadu on Hosur Road,” he added. Bharat Mala Pariyojana Through Bharat Mala Pariyojana, the Union Ministry of Road Transport and Highways takes up a detailed account of the National Highway network with the aim to improve connectivity. ABOUT PRR The Peripheral Ring Road (PRR) is aimed to decongest the city’s roads, especially the Outer Ring Road, which is used by at least 10,000 trucks every day. To relieve the traffic pressure on ORR and other major roads of Bengaluru city, a Peripheral Ring Road of 65 km was planned outside of the ORR. This road would not only improve connectivity to areas beyond the ORR, but would also ease congestion. It will start from Hosur Road and extend till Tumkur Road, passing via KR Puram, Bellary Road, Old Madras Road and Sarjapur Road. The project is to take off from near Makali on Benglauru-Pune road and connect with Hosur Road. Mark Jackson Jersey
HDFC and NHAI likely to raise Rs 10,000 crore via Masala bonds
Housing Development Finance Corporation (HDFC) and National Highway Authority of India (NHAI) are set to raise funds from the international markets as the US’ Federal Reserve is widely expected to raise interest rates at least three times this year. Together, they could raise up to Rs 10,000 crore by selling rupee-dominated masala bonds (Rs 5,000 crore each) to investors before the end of this fiscal mostly, said multiple sources with direct knowledge of the matter. An email sent to NHAI remained unanswered till the time of going to press. “We have received in-principle approval to raise another Rs 5,000 crore via rupee-denominated bonds,” Keki Mistry, VC & CEO, HDFC, told ET. “We will deploy the proceeds in housing loans as we see larger demand over time as a result of the government’s continued focus on housing. We will look for a right time to enter the market and borrow money under the programme,” he said. “India is an attractive investment destination and the confidence of foreign investors is reflected in their continuing interest in investing in equity and debt of Indian companies,” he said. While NHAI has appointed three bankers –– Axis BankBSE 0.20 %, Standard Chartered Bank and Nomura –– HDFC is in talks with bankers, sources said. Individual banks could not be contacted immediately for comments. “Bankers would be aiming to raise the whole sum or most of it, before the financial year ends as US rate increases look imminent, adding to borrowing cost,” said a senior banker. HDFC, India’s largest mortgage lender, was the first to tap the masala bond market last year collectively raising Rs 5,000 crore worth of masala bonds. These bonds, listed on the London Stock Exchange, has three-year maturities and are priced a few basis points lower than its domestic corporate bond rates. Yields of those LSE-listed bonds have fallen recently pushing up prices. “Indian borrowers tap masala bond market either to diversify their borrowing resources or get a large sum at a cheaper cost,” said Ajay Manglunia, executive VP (fixed income), Edelweiss Finance. “If such overseas deals are sold 15-20 basis points less than their domestic corporate bonds, issuers stand to gain.” “HDFC and NHAI are top-rated issuers, and will play a crucial role in deepening the masala bond market,” he said. One alluring factor is the relative stable exchange rate as global investors, including hedge funds and private banks, are supposed to take the currency fluctuation risk on such investments unlike in dollar-denominated bonds where issuers take the same. “We have signed contracts worth Rs 5 lakh crore for infrastructure, roads, ports….we are receiving good response for the public-private partnership, build-operate-transfer and hybrid annuity (models),” Nitin Gadkari, road transport, highway and shipping minister had said a few days ago. Lucas Johansen Authentic Jersey
NHAI-hybrid annuity model: HAM model tailored to cut risk for developers, but bankers need more comfort to lend to these projects
Although nearly 40 road projects worth around Rs 35,000 crore, to be built via the hybrid annuities model (HAM) have been bid out by the government since December 2015, more than a dozen of these are stuck for want of financial commitments. Since it is mandatory to have financial closure within 150 days of the projects being awarded, there is a real chance many of these will fall by the wayside. As opposed to the build-own-transfer model, the HAM model was tailored to reduce the risk for the developers with National Highway Authority of India (NHAI) shouldering the obligation to acquire land, obtain the environment clearances, estimating traffic and collecting the toll. However, bankers are apprehensive that developers now have too little skin in the game. With 40% of the project cost coming as a grant from NHAI, the concessionaire’s equity participation is reduced to just 15% of the remaining 60% of the project cost, or a mere 9%. Given their mixed experience with lending to the roads sector, it is not surprising bankers are being cautious. They are reluctant to fund the projects even after it was decided thatNHAI’s grant of 40% would be drawn down in the early stages of construction rather than being a milestone-based release of funds. An analysis by CRISIL of eight projects shows the bids have been somewhat aggressive—it turned out the average number of bidders had increased from three to 10 and that only four of the projects were viable. In such a situation, bankers are right in saying this will expose developers to cost over-runs while the annuity payments are fixed; indeed, the costs budgeted for by builders are lower than those estimated by the NHAI. Even otherwise, risks associated with road projects are not low, which is why lenders want the concession agreement to build in a stiff compensation in the event of a default. They are looking at nothing less than 90% of the outstanding debt. If bankers are not given the requisite comfort, the new scheme to get roads projects could also trip up. Jonathan Jones Authentic Jersey
Union Budget 2017: Petroleum Ministry gets cracking on creation of oil goliath in India
The ministry of petroleum and natural gas has started discussions with state-run oil and gas companies to take forward the Budget proposal to create a globally competitive “oil major” by consolidating the firms. The ministry officials have met heads of all public-sector oil companies and asked them to suggest possible merger scenarios, said a person close to the development requesting anonymity. Finance minister Arun Jaitley had announced in his Budget speech on February 1 that the government plans to merge state-run oil and gas entities to create an integrated firm having the strength to compete with international and domestic private oil and gas majors. He had emphasised that the move will provide the merged entity “capacity to bear higher risks, avail economies of scale, take higher investment decisions and create more value for the stakeholders”. The move will require the petroleum ministry to do a lot of ground work and think of ways to initiate the proposed consolidation, before the department of investment and public asset management steps in to execute the plan. There are 18 oil and gas state-run utilities including Oil and Natural Gas Corporation (ONGC), Oil India, GAIL (India), Bharat Petroleum Corporation, Indian Oil Corporation and Hindustan Petroleum Corporation. The idea has been received with mixed reactions by the industry. Though some have welcomed it, ONGC chairman Dinesh Sarraf had on February 9 told Reuters that the oil explorer’s overseas arm, ONGC Videsh, should not be merged as such horizontal integration would create monopoly. A GAIL (India) executive, as reported by FE earlier, had said their business model is distinct from others and it may remain a separate vertical even in case of a merger. HomeEconomy Union Budget 2017: Petroleum Ministry gets cracking on creation of oil goliath in India Union Budget 2017: Petroleum Ministry gets cracking on creation of oil goliath in India The ministry of petroleum and natural gas has started discussions with state-run oil and gas companies to take forward the Budget proposal to create a globally competitive “oil major” by consolidating the firms. By: Prasanta Sahu and The Financial Express | New Delhi | Updated: February 15, 2017 7:56 AM 84 SHARES FacebookTwitterGoogle+LinkedInEmail oil The ministry officials have met heads of all public-sector oil companies and asked them to suggest possible merger scenarios, said a person close to the development requesting anonymity. The ministry of petroleum and natural gas has started discussions with state-run oil and gas companies to take forward the Budget proposal to create a globally competitive “oil major” by consolidating the firms. The ministry officials have met heads of all public-sector oil companies and asked them to suggest possible merger scenarios, said a person close to the development requesting anonymity. Finance minister Arun Jaitley had announced in his Budget speech on February 1 that the government plans to merge state-run oil and gas entities to create an integrated firm having the strength to compete with international and domestic private oil and gas majors. He had emphasised that the move will provide the merged entity “capacity to bear higher risks, avail economies of scale, take higher investment decisions and create more value for the stakeholders”. The move will require the petroleum ministry to do a lot of ground work and think of ways to initiate the proposed consolidation, before the department of investment and public asset management steps in to execute the plan. There are 18 oil and gas state-run utilities including Oil and Natural Gas Corporation (ONGC), Oil India, GAIL (India), Bharat Petroleum Corporation, Indian Oil Corporation and Hindustan Petroleum Corporation. The idea has been received with mixed reactions by the industry. Though some have welcomed it, ONGC chairman Dinesh Sarraf had on February 9 told Reuters that the oil explorer’s overseas arm, ONGC Videsh, should not be merged as such horizontal integration would create monopoly. A GAIL (India) executive, as reported by FE earlier, had said their business model is distinct from others and it may remain a separate vertical even in case of a merger. However, unlike as was believed after Jaitley’s announcement that one large behemoth will be created, oil minister Dharmendra Pradhan had clarified that it will not be a merger of all companies, that more than one large company could be created or smaller firms may be merged into larger Navratna companies. News channel ET Now, sourcing wire agency Newsrise, on Tuesday tweeted that according to an oil ministry official, at least one merger between oil firms will be announced by September 30. Talking about the merger scenarios, a government official not wanting to be named said there are various options to consolidate the public sector oil companies. “These include creating a holding company, or creating two companies by merging the upstream ones together and downstream ones separately.” The official reiterated what Pradhan said and added that the third option could be merger of smaller companies with larger ones. According to a recent Fitch Ratings report, though the move could reduce inefficiencies across the sector and create an entity that is better placed to compete globally for resources and less vulnerable to shifts in oil prices, a merger would face significant execution challenges. The main hurdles, according to the report, will be faced in terms of managing the integration of employees, addressing overcapacity in the merged entity, and winning the backing for merger from private shareholders. Some experts like former Planning Commission member Kirit Parikh have argued against the government’s move. “When these activities are combined into one unit, inefficiency in one activity can be hidden by the efficiency of another. This reduces the incentive to be efficient for the loss-making company and reduces resources for growth and investment for the profit-making company,” Parikh wrote in The Times of India, even as he admitted that one giant oil corporation will increase the bargaining power of the company in purchasing crude in the international market. Scott Wedgewood Jersey
Shell, Pavilion Gas to start shipping LNG to Singapore in 2017
Shell Eastern Petroleum and Pavilion Gas will start supplying Singapore with liquefied natural gas (LNG) later in 2017 under contracts awarded last year, the city-state’s trade minister said. The two firms were awarded the right to supply LNG to Singapore last October, and will have exclusive franchises that last for three years, or until their shipments reach 1 million tonnes a year, whichever comes first. Singapore is planning to import more of the super-cooled fuel as contracts for natural gas supplied via pipelines from Malaysia and Indonesia are due to expire in the early 2020s. “We will also allow interested parties to import spot LNG in the second half of 2017, up to 10 percent of the total gas imports in Singapore,” trade minister S Iswaran said. Pavilion Gas, a unit of privately held Singapore-based Pavilion Energy Pte Ltd, and Shell Eastern Petroleum, a unit of Royal Dutch Shell, join BG Singapore Gas Marketing as the country’s approved LNG importers. BG Singapore – now part of Shell after the Anglo-Dutch major bought its parent, the BG Group – was the first company to import LNG into Singapore in April 2008. Singapore’s LNG terminal, which is run by Singapore LNG Corporation (SLNG), is also to commission a nitrogen blending facility this year, Iswaran said, adding that the unit will “enable Singapore to accept a wider range of cargoes with varying LNG specifications.” Some natural gas types cannot be held in storage without adding nitrogen, and such a facility would allow Singapore to import from a broader base of suppliers. Singapore is also planning to allow other parties to use spare storage capacity at its LNG terminal for storage and reload services. “This is a business area that will grow with the completion of a fourth tank at SLNG by 2018, which will increase our storage capacity by 260,000 cubic meters, to a total of 800,000 cubic meters,” Iswaran said. SLNG will call for proposals from companies interested to use its spare capacity later this year, the minister said. Tom Compton Authentic Jersey
Business aircraft operators air their concerns over UDAN
Business aircraft operators addressed their concerns over the Centre’s Regional Connectivity Scheme to the executive director of Airports Authority of India (AAI) at the BizAV India 2017 conference organised by Business Aviation Operators Association (BAOA), here on Monday. The scheme, also known as Ude Desh Ka Aam Nagrik (UDAN) intends to boost air connectivity to underserved or unserved airports in the country and increase accessibility to air travel. Rohit Kapur, managing director of Arrow Aircraft Sales and Charters said that while the policy was good, the implementation is falling short of expectations. “We needed a policy which would allow non-scheduled operators’ transition seamlessly into scheduled flight operators. But, the Directorate General of Civil Aviation (DGCA) has placed several entry barriers.” He pointed out that several single-engine aircraft were serving low-traffic routes in Madhya Pradesh and Rajasthan but the draft civil aviation requirements formed by DGCA say that only twin-engine aircraft can be used for scheduled flights. G K Chaukiyal, executive director (Project Monitoring and Quality Assurance) in AAI, said that work on the scheme was in full swing and changes are being made based on concerns of stakeholders. The civil aviation ministry is in discussions over the issues Kapur raised, he said. Kevin Hogan Womens Jersey
Airfares crash post demonetisation; passengers up 22% in November, December 2016
Airlines have seen as much as a 35% decline in average domestic fares in the three months through January, as demonetisation took away their pricing power at a time when they were also adding capacity. Data compiled by Yatra.com, India’s second largest online travel portal, show average domestic fares from November 1, 2016 to January 31 this year declined on key domestic routes compared with a year earlier (see chart). Scrapping of the Rs 500 and Rs 1,000 banknotes, announced by the Prime Minister on November 8, drained out more than 85% of the total cash in circulation. Consumers limited spending as replenishing of cash in ATMs and banks moved at a slow pace, crippling demand for everything from soaps and packaged food to automobiles and real estate. The weak sentiment, airlines said, rubbed off on their performance. IndiGo, the local market leader, blamed the “impact on consumer spending and behaviour” from demonetisation for the fall in fares. “The monetisation policy went into effect on November 8 and for the full month of November, our yields were down 20% and in December our yields were down 17%,” IndiGo chief financial officer Rohit Philip said during the company’s earnings call on January 31. The situation, though, is improving. In January, the yield decline was smaller at about 10%. “Based on the January 2017 yield forecast, we are hopeful that the effects of demonetisation are largely behind us,” Philip had said. SpiceJetBSE -5.91 % chairman Ajay Singh said discretionary travel went down post demonetisation, hurting international business that accounted for about a quarter of the airline’s revenue. Airline is an industry where digital payments had already become somewhat a norm even before demonetisation — the government cites promotion of cashless payments as one of the objectives of the note-recall. Many expected this would insulate the industry from demonetisation effect. But lastminute travel, where a chunk of payments was still in cash, took a hit as a result of liquidity crunch, hurting the pricing power of airlines, said experts. “Our pricing power was gone, may be, because a lot of last-minute ticket bookers – corporate travellers including from small and medium enterprises – postponed or cancelled their travel,” said a senior executive at a full-service carrier, who didn’t want to be identified. The executive, too, reported an improvement in January, after “a sharp dip in average fares during November and December”. Travel industry insiders see another reason for the impact on fares. Airlines added capacity in recent months, which led to a demand-supply mismatch. “We believe that declining average fares are driven more by the capacity addition by airlines. The number of domestic passengers has increased by a very healthy 23% over last year despite demonetisation, which means it never had a major impact on the aviation sector,” said Sharat Dhall, chief operating officer (B2C), at Yatra.com. Notably, the number of air passengers grew in double digits despite the note ban, by 22.45% and 23.91% in November and December, respectively. These two months are the peak months for the industry in India. Justin Blackmon Jersey