Indian aviation is growing but it’s straining airports: Why 1 in 4 flights are getting delayed
The fastest growing aviation market across the globe continues its struggle infrastructure and performance metrics of its airlines. Data released by DGCA show not a single airline managed to operate one in four flights on time from four of India’s busiest airports last month. This, when India’s airlines carried close to 10 crore passengers in 2016, with 12 consecutive months of above 20 percent growth. The delays have been increasing as traffic grows. SpiceJet managed average on-time performance of just 70 percent across Bengaluru, Mumbai, Delhi and Hyderabad airports in December and this was the best on-time performance by any airline during December. As expected, Air India fared the worst with at least four in 10 flights getting delayed. And others fared only marginally better, getting almost every third flight from these airports delayed. Traditionally, flying in and out of Mumbai has been the biggest bane for any airline due to massive congestion at this airport. Well, in December, Air India did not get even half its flights on time at this airport and even market leader IndiGo barely managed to get 50 percent of its flight on time here. So when the government goes ga-ga over impressive traffic growth in the skies and talks of India becoming a global leader in aviation, it must consider developing a robust airport infrastructure too to keep pace with this kind of growth. India’s aviation traffic almost doubled in the last six years. Airport capacity hasn’t. Infrastructure has failed to keep pace with traffic growth fueled by rising incomes and affordable fares. Sonny Milano Womens Jersey
11 bidders, 45 initial proposals for regional air services
Eleven bidders have submitted 45 initial proposals covering more than 200 Regional Connectivity Scheme routes under the UDAN scheme which seeks to encourage common people to fly. “The initial proposals cover 65 airports, of which 52 are unserved and 13 underserved,” the Ministry of Civil Aviation said in a statement. January 16 was the last date for submission of initial proposals for operations under the UDAN scheme. Classification An airport at which there are no more than seven scheduled commercial flight departures a week is termed as an underserved airport while an ‘unserved airport’ is one at which there have been no scheduled commercial flights during the last two flight schedules approved by the DGCA. Globally, airlines follow a summer and winter schedule, with the summer schedule running from the last Sunday in March to the last Saturday in October. The winter schedule runs from the last Sunday in October till the last Saturday in March of the following year. The Ministry’s attempts to get the common man to fly at low rates is unlikely to take off before March or later this year as the last date of submission for counter bids for the initial proposals is February 1. Officials indicated that apart from operators importing aircraft, it has to be ensured that the airports are operational, and the flights have to be marketed. List of airports All this is likely to take a few months. An operator is allowed 90 days from the time the route is awarded to launch flights. In October last year, while announcing the Regional Connectivity Scheme, the Ministry of Civil Aviation in its RCS document gave a tentative list of 16 underserved airports/airstrips in the country, which included Aggati in Lakshadweep Islands, Car Nicobar (Andaman Islands) and Bhavnagar (Gujarat). It also gave a tentative list of 398 airports/airstrips that were unserved. They included 13 in Karnataka, 12 in Tamil Nadu, including Vellore, Tambaram, Salem, Hosur and Chettinad, and one in Kerala (Chillari). The routes or networks will be awarded to the bidders who quote the lowest requirement for the viability gap funding (VGF) against such routes. To be able to seek this subsidy, an operator has to price its tickets for a one-hour journey of approximately 500 km on a fixed wing aircraft or for a 30-minute journey on a helicopter capped at ?2,500. Ty Rattie Womens Jersey
Higher coal prices, clean energy cess wiped out UDAY gains: Analysts
Power procurement costs have risen as higher coal prices and clean energy cess have wiped out gains from government moves to reduce costs under the Ujwal Discom Assurance Yojana (UDAY) scheme, analysts said. “As part of the government’s initiative, availability of coal and utilisation rates have improved, resulting in savings for power firms along with rejigging of sources of coal that has also resulted in reduction in transport costs for coal,” Sudip Sural, senior director, CRISILBSE -0.05 % Ratings said. “On the other hand extraneous factors outside the control of ministry of power, like increases in clean energy cess, domestic and international coal prices rise and hiked railways tariffs have outweighed generation cost reducing measures,” he said. Coal India BSE 0.11 % raised production and sales by 8 per cent, railways improved rakes availability helping some power plants become flush with stocks. However, this increased availability was not enough for all thermal power plants, industry executives said. “In fact, plants that have been put up after 2009 have been running at less than 50 per cent capacity utilisation levels,” he said. At lower capacity utilisation cost of generation tends to rise,” said a senior power sector official. If cost of procurement rises, state utilities will have to take hike in power tariffs and in 2016 it was estimated that for every unit of power sold to utilities a fraction of the cost does not get collected. According to UDAY this gap needs to be zero by 2019. Nevertheless, fresh power generation project to the tune of 24,000 MW are at risk. Of these 13,000 MW of projects according to CRISIL are facing commissioning risks because of weak sponsors. These projects have faced significant delays leading to cost overrun. In fact some 10,500 MW projects have not seen 50 per cent progress. The situation has exacerbated as some of these projects do not have power purchase agreements. Tevin Coleman Authentic Jersey
Argentina says 89 companies have offered to build electricity generation projects
Argentina’s energy ministry said on Tuesday that 89 companies are interested in building 196 projects to generate electricity as the government tries to attract private investment to lift the country out of recession. If built, the projects would generate 34,834 megawatts of energy, the ministry said. A government source said they would bring in $30 billion in investment, although not all projects would be awarded. The project presentations will be analyzed and an auction will be held in the first half of the year before contracts are signed, the statement said. Center-right President Mauricio Macri is trying to attract private investment to build roads, trains, transmission lines and other infrastructure to boost Argentina’s economy. The energy ministry statement said the energy projects would reduce the cost of energy on the local market. In October the government said it expected investment of $1.8 billion from 17 renewable energy projects it awarded in an auction. It had received 123 bids in September, as companies looked to build wind, solar and biogas projects. Nick Holden Jersey
Big Oil back on the acquisition trail as outlook brightens
The world’s top oil companies are back in acquisition mode, targeting smaller exploration and development firms to boost oil and gas reserves rather than the mega-mergers that followed previous slumps in crude prices. Since late November, major oil companies have announced 11 deals worth more than $500 million each with a combined value of $31 billion, the clearest sign yet that oil executives are more confident a recovery is underway. When crude prices collapsed in the second half of 2014, large oil firms slashed spending on exploration and production and offloaded assets to reduce debt so they could cope with lower revenue from oil and gas sales. But with crude reservoirs declining at a rate of 10 percent a year in some cases, major oil companies are now looking to snap up assets to start growing again and there are plenty of smaller firms burdened with debt looking to sell. “You’re seeing the majors sharpening their pencils after a long while and actually flipping around from disposals to acquisitions,” said Tony Durrant, chief executive of British energy firm Premier Oil , which is looking to sell several stakes in its North Sea operations. Total acquisitions of oil and gas fields, known as upstream assets, tripled to $31 billion in December from a month earlier, when the Organization of the Petroleum Exporting Countries agreed to cut output for the first time in eight years, according to data from consultancy Energy Market Square. Deals in the last month of 2016 alone accounted for nearly a quarter of total activity during the year. MAJOR DEALS BP announced a string of investments in the last two months of 2016, including a $1 billion partnership with Dallas-based Kosmos Energy in Mauritania and Senegal in West Africa, as well as acquisitions in Abu Dhabi and Azerbaijan. The British company also spent $375 million on a 10 percent stake in Eni’s giant Zohr gas field in Egypt while Russian oil giant Rosneft bought 30 percent stake of the same field for $1.575 billion. France’s Total and Norway’s Statoil bought into Brazil’s lucrative sub-salt deepwater oil fields while ExxonMobil Corp bought assets in Papua New Guinea to meet growing Asian demand for liquefied natural gas. The trend continued in January with Total boosting its stake in Uganda’s Lake Albert oil project by snapping up most of Tullow Oil’s stake for $900 million. ExxonMobile and Noble Energy also struck deals worth nearly $10 billion combined for a larger slice of the Permian Basin, the largest U.S. oil field. While deal making outside the United States almost ground to a halt at the start of 2016, acquisitions in North American shale basins have continued at a steady pace. In the Permian Basin, for example, the time it takes to produce oil and gas after an initial investment is far quicker and cheaper than developing conventional fields over three to five years. ONLY CHOICE More deals are likely this year as the large overhang of crude oil in the world that has weighed on the market since 2014 continues to clear and oil prices rise. “When you can cut capex (capital spending), two-and-a-half to three years later you see production decline and reserves depleting and you have one choice only and that is going after high quality resource,” said Sachin Oza, co-manager with Stephen Williams of the Guinness Global Oil and Gas Exploration Trust. “If you’ve not spent any time filling your hopper with these opportunities that take five years to build up, there is only one choice: you have to buy them,” said Oza. The Guinness Trust is a fund that invests in firms in the early stages of exploration or development of energy resources which it believes will attract investment from oil majors. Investors reckon large firms will focus on underdeveloped basins in east and west Africa, Romania and Albania, as well as nascent Latin American reserves in places such as Colombia, all areas where the growth potential is seen as greater than in established regions such as North America and the North Sea. While slides in oil prices typically unleash a wave of takeovers, companies emerging from the current downturn are generally shunning outright acquisitions and instead looking at specific deals for specific fields. After a prolonged period of low oil prices in the late 1990s Exxon merged with Mobil, Total merged with Elf Aquitaine and Petrofina, Chevron bought Texaco, BP snapped up Amoco and ARCO and Conoco and Philips merged. This time round, the only stand-out acquisition has been Royal Dutch Shell’s takeover of BG, which was announced in April 2015 and completed in February a year later for $53 billion. BUYER’S MARKET As large oil firms are wary of increasing their debt burden at this point, investors say corporate acquisitions are likely to be limited in numbers and scope but oil field assets are very much in the crosshairs. Oil majors are opting for joint ventures to develop specific fields in complex deals, such as share swaps or deferred payments, to lower their risk and limit the amount they need to spend upfront following two years of budget cuts. “The international (ex-U.S.) asset market is a buyer’s market, as sellers continue in balance sheet preservation mode,” said Charles Whall, energy portfolio manager at Investec Asset Management. “European majors, which already have large dividend commitments, are unwilling to use equity for assets without immediate cash flow … Most of these asset deals are structured to minimise the debt impact in the near term,” he said. Such deals also mean the sellers can retain a stake in the assets as their value rises with oil prices, said Oza and Williams at the Guinness Trust. Analysts say for much of 2015 and 2016 there was subdued activity because buyers and sellers were too far apart on price. Buyers hunting for bargain-basement deals were frustrated by sellers holding out for better terms but as oil prices have started to stabilise there has been more convergence. According to Martijn Rats,
Saudi Arabia’s oil giant likely to set up crude refinery in Andhra Pradesh
Global giant in the oil sector, Saudi Aramco has hinted at setting up a refinery in Andhra Pradesh. The Saudi Arabian oil major also evinced interest in turning coastal Andhra Pradesh as one of its major bases but this plan will move forward only after the Centre okays the proposal. Chief minister N Chandrababu Naidu, who was in Davos to attend the World Economic Forum (WEF) summit, held negotiations with Aramco president and CEO Amin al-Nasser on Wednesday, and extracted a positive response on making investments in AP. The chief minister promised Naseer to allot land and water without any hassle for the mega refinery. Aramco, officially the Saudi Arabian Oil Company, is a Saudi Arabian national petroleum and natural gas company based in Dhahran. Buoyed by Nasser’s assurance, the chief minister said that a high-level delegation will be sent to Dhahran within a fortnight. Extolling on how Andhra Pradesh is endowed with rich natural resources, Naidu told Nasser that his government is firm on completing the mega petro-chemical corridor along the coast. Articulating elaborately on the oil reserves in the Krishna-Godavari basin, Chandrababu invited Aramco to invest in Andhra Pradesh. He also spoke about the proposed petro-chemical university. In response, Nasser said that Aramco would collaborate with the government in India first and study the possibility of partnering with Andhra Pradesh in setting up the refinery. James Hurst Womens Jersey
Cairn Energy says it has the funds to fuel its projects through to production
The independent oil and gas explorer expects first oil from its Catcher and Kraken developments east of the Shetland Islands this year. The wells are expected to produce 25,000 barrels of oil equivalent per day. Simon Thomson, Chief Executive, Cairn Energy PLC said: “Cairn is fully-funded in respect of all of our capital commitments and we continue to actively assess and pursue new ventures”. The Edinburgh based company will also begin its third drilling program in Senegal later this month. Shannon Sharpe Jersey
Why oil can spoil India’s budget math
One of the biggest drivers of India’s superlative macro-economic performance in the recent past has been a relatively under-appreciated element: oil. Since 2014, the dramatic fall in crude oil prices has helped India contain her twin deficits, and tame inflation. But with oil exporting countries planning to curtail oil supply, raising the possibility of a rise in oil prices, the Indian economy might soon have to deal with another pain point besides demonetisation. The extent of the gains from lower oil prices since mid-2014 is under-appreciated as the benefits have not been evident in the retail prices of petrol or diesel. However, the government did improve its finances, using the opportunity to increase the amount of taxes collected on petroleum products, as the charts below illustrate. The excise duty collected by the Union government on petrol and diesel has been hiked nine times since November 2014. The Union government’s tax collection from petrol and diesel has increased from 0.4% of GDP in 2013-14 to 1.1% in 2015-16, i.e. an increase of 70 basis points (bps) in two years. To put this in perspective, this is more than the 60 bps reduction achieved in gross fiscal deficit (from 4.5% of GDP to 3.9% of GDP) over the same period. One basis point is one-hundredth of a percentage point. In other words, the entire reduction in India’s fiscal deficit could be attributed to the increase in Centre’s tax revenue from petrol and diesel alone. Hence, it is fair to say that falling crude oil prices have driven the improvements in India’s public finances over the past couple of years. Looking at more recent data for the first half of the fiscal year ending March 2017 (April-September 2016), and combining taxes with other oil-linked receipts such as dividends from public sector petroleum companies and states’ VAT collection on petroleum products, we find that the total receipts of the Centre and state governments’ from the petroleum sector have risen by about 50 bps since fiscal 2015 to 3.14%. Even the above-mentioned gains from the petroleum sector might be an underestimate because besides the increase in taxes, the Centre also gained from reduced subsidy burden owing to the fall in crude prices. Diesel prices were deregulated in 2014 and the diesel subsidy was eliminated in the last fiscal year (2015-16) itself. Previously, subsidy on diesel would cost 0.6% of GDP (FY14), jointly borne by the government and the public sector petroleum companies. Besides, subsidies on PDS kerosene and LPG have also reduced; however these reductions could also be attributed to government initiative to reform rather than a fall in petroleum prices per se. The upcoming Union Budget 2017 is likely to assume an average crude oil price of $55-$60 per barrel, as reported by the Hindustan Times. However, there remain risks that oil prices, which are already near $55 per barrel, could shoot up if the Organization of Petroleum Exporting Countries (Opec) and other oil exporters make good on their pledge to cut global oil supply by around 1.8%. Such a scenario, according to the International Energy Agency, would move the global oil market into deficit in the first half of 2017, i.e. demand would outstrip supply, after more than two years of comfortable surplus. In such a scenario, if oil rises above the government’s comfort zone to say around $70 per barrel, then the government could lose tax revenues equivalent to about 0.4% of GDP which would jeopardize the government’s plan to cut the fiscal deficit to 3% of GDP next year. To illustrate, in a hypothetical scenario where the global crude oil price is $70 per barrel in the coming fiscal year (2017-18) and the USD/INR exchange rate remains stable at 68, the government could either allow the petrol price (Delhi) to rise by another Rs10 to over Rs80 per litre, or reduce its excise tax duty from currently Rs21.48 per litre to Rs11.48 (if it wishes to keep prices same). If the government decides to reduce excise duties on petrol and diesel in similar fashion, then the Centre’s revenue from petrol and diesel could shrink to 0.7% of GDP in fiscal year 2018 compared to 1.1% in fiscal year 2016, back-of-the-envelope calculations show (assuming annual growth of 11.4% and 4.1% in demand for petrol and diesel respectively, as has been observed in the year so far). Thus, a spike in oil price to around $70 per barrel is enough to strain our public finances and add 0.4% to the Centre’s fiscal deficit. This would be over and above the increasing expenditure obligations on interest, salaries and pensions, compounded by Seventh Pay Commission recommendations and OROP. If the government wishes to keep petrol and diesel prices unchanged, without sacrificing its tax revenues, then it would have to resort to subsidies (or under-recoveries) as used to be the case in yesteryears. Thus, no matter the recourse adopted, government finances will most likely be hit severely if oil prices rise, unless the government allows the prices of petroleum products to rise. Besides posing risks for the government’s finances and stoking the fires of inflation, a rise in oil prices would also worsen the current account deficit. Assuming crude oil prices at $70/barrel and pencilling a constant pace of rise in volumes in oil imports and exports, as seen in the current fiscal year so far, and keeping all other things constant, India’s current account deficit could widen to 1.7% of GDP in fiscal 2018 compared to 1.1% of GDP in fiscal 2016. India’s net oil and gas import bill, i.e. adjusting for exports of petroleum products, amounts to around 2.5% of GDP, higher than India’s overall current account deficit and hence plays a big role in determining the dynamics related to the balance of payments. Thus, if there is one commodity to watch out for in 2017, it is likely to be oil. 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Cabinet approves MoU between India and the United Arab Emirates on Bilateral Cooperation in the Road Transport and Highways sector
The Union Cabinet chaired by the Prime Minister Shri Narendra Modi has approved the Memorandum of Understanding (MoU) between India and the United Arab Emirates on Bilateral Cooperation in the Road Transport and Highways Sector to be signed between the Ministry of Road Transport and Highways, India and the Federal Transport Authority – Land and Maritime, U.A.E. The proposed MoU envisages increased cooperation, exchange and collaboration between India and the UAE, and will contribute to increased investment in infrastructure development and enhance logistics efficiency. This will help in promoting safe, economical, efficient and environmentally sound road transport in the country and will further help both the countries in creating an institutional mechanism for cooperation in the field. Salient features of the MoU are: Exchange and sharing of knowledge and cooperation in the area of transportation technologies and transport policies, for passenger and freight movement by roads; Planning, administration and management of road infrastructure, technology and standards for roads/highways construction and maintenance; Sharing of information and best practices for developing road safety plans and road safety intervention strategies, and outreach activities aimed at reducing deaths and injuries resulting from road accidents through: Sharing of knowledge and best practices in user-free (toll)-related issues; including modern systems, technologies and methods of levying of user-free and collection including Electronic Toll Collection System; 6.Sharing of information areas of improved technologies and materials in road and bridge construction, including joint research; and Sharing of information and cooperation for mobilizing investments for setting up of Logistics Parks, freight logistics, transportation warehousing and value added services (VAS) as an enabler and as a catalyst of economic growth and seamless freight movement. Robert Nkemdiche Jersey
Big Investment of $1.77 billion Flowed as FDI in India’s Renewable Energy sector: Report
India witnessed a total of $1.77 billion equity investment in the form of foreign direct investment (FDI) in the non-conventional renewable energy (RE) sector between April 2014 and September 2016, the Modi government said in an “Achievement Report” of its flagship Make in India initiative. As per the data available, a majority of the bigger investments have come from Mauritius, Malaysia, Philippines, Singapore, Japan, Germany, Spain, US and Seychelles. Under automatic route for projects of renewable power generation and distribution, 100 per cent FDI is allowed subject to provisions of the Electricity Act, 2003. According to the report, the renewable energy sector has witnessed the highest-ever solar power and wind power capacity addition since April 2014. In the last two years, the world’s largest 648-Megawatt solar power plant was commissioned in Tamil Nadu, a 157 per cent increase in solar power capacity addition was achieved, highest ever wind power capacity addition of 3,300 MW was carried out in 2015-16 and 34 solar parks of aggregate capacity of 20,000 MW were sanctioned for 21 states, the report said. The report also added Rs 356.63 crore were released to Solar Energy Corporation of India for projects and over 31,000 solar water pumps were installed in 2015-16 and 501 MW grid connected solar rooftop projects have been installed in the country. Jake Elliott Authentic Jersey