PMO seeks detailed report of Air India’s performance
With the NDA government set to present its third Budget next month, the Prime Minister’s Office has sought a detailed performance report from flag carrier Air India, which is surviving on a ?30,000-crore bailout package from the exchequer. Top Air India management is expected to make a presentation in this regard during a review meeting at South Block later this week, sources said on Monday. The government-run carrier reported operating profit of ?105 crore, the first time since the merger of erstwhile Air India and Indian Airlines, in the previous fiscal mainly on account of low fuel prices and discounted ticket sales, among others. “These review meetings are a part of the monitoring mechanism since the government is infusing funds in the carrier,” an airline official said on condition of anonymity. According to the official, besides giving a presentation on the current financial position of the airline, the proposal to increase retirement age in Air India from the current 58 years to 60 years and its request for more funds for the current fiscal are also expected to come up for discussions. Air India is surviving on a ?30,231-crore bailout package extended by the previous UPA government in 2012 for a 10-year period and also equity support for payment of principal/interest of the non-convertible debentures. William Hayes Authentic Jersey
India likely to add more than 9 GW solar capacity in 2017: Mercom
New solar capacity addition in India is expected at over 9 GW during the current calendar year 2017, according to Mercom Capital Group, a global clean energy communications and consulting firm. The calendar year 2016 saw solar installations at about 4 GW as against 2.3 GW installed in 2015. “We are forecasting installations to reach over 9 GW in 2017, which would put the Indian solar sector in the big league along with China, the US, and Japan. However, there are significant headwinds in terms of transmission and evacuation issues that could threaten the pace of growth,” said Raj Prabhu, CEO and co-founder of Mercom Capital Group. The share of solar generation continues to grow with 16.7 per cent of new power generating capacity added in 2016 (as of November 2016). Cumulative solar capacity, including large-scale and rooftop projects in the country, reached 9.6 GW. The top 10 states — Tamil Nadu, Rajasthan, Gujarat, Andhra Pradesh, Telangana, Madhya Pradesh, Punjab, Karnataka, Maharashtra, and Uttar Pradesh — account for about 90 per cent of all solar installations and pipeline. Indian government agencies have announced solar tenders of about 3,781 MW during the September-December 2016 period and auctioned about 1,311 MW. However, auction activity has slowed over the last three months. The project development landscape has changed significantly over the last quarter, due largely to Chinese module price declines. The average selling prices (ASPs) of Chinese modules in India have declined by approximately 10 per cent since August and by about 30 per cent over the last 12 months. This decline in prices has provided a much-needed boost to developers that won projects at low bids and were struggling to make project economics work, it said. Currently, the major concerns for the industry are related to transmission, evacuation, curtailment, timely payments and the outcome of the goods and services tax (GST). “Solar park development is experiencing some setbacks due to incomplete infrastructure,” felt Prabhu. “In some cases, developers are incurring expenses to clean the land, build roads, and are waiting for power to be evacuated after commissioning. All of this is having a negative effect on project cost and profitability,” he added. Mercom pointed out that demonetisation had caused a temporary setback in the industry. Richard Rodgers Jersey
Power transmission investment likely to be at ~2 lakh crore: CEA
Indicating significant growth in the power transmission sector, the Central Electricity Authority (CEA) has estimated an investment of Rs 2.6 lakh crore till 2022. These and other estimates form the base for a draft National Electricity Plan-Volume II, which would be the basis for investment and policy planning in the sector. Inter-regional capacity addition during the 13th plan (2017-22) is estimated at 45,700 Mw, from the present 63,650 Mw by the plan end, said CEA in the draft. The investment figure, it said, included an estimate of Rs 30,000 crore in transmission systems below 220 kv. About Rs 1.6 lakh crore would come from states and the other Rs 1 lakh crore from Power Grid Corporation of India. The government is planning to increase the size of projects and scope of work in transmission. Inter-state lines with capacity of around 56,000 Mw are being planned by the end of the 13th plan. In the first volume, CEA had said more more thermal power GENERATION capacity wasn’t needed but supply needed to be more accessible and affordable. And, that renewable energy generation would be 20.3 per cent and 24.2 per cent of the total energy requirement in 2021-22 and 2026-27, respectively. CEA says the already planned transmission corridors between regions is sufficient to cater to variable dispatches at peak times, with provisos. The estimate is that India would need 100,000 circuit km (ckm) of transmission lines and 2,00,000 MVA transformer capacity of substations at 220 kv and above voltage was expected to be added in the 13th plan. It has suggested that investment be invited through competitive bids. “It is expected that a total of 107,454 ckm of transmission lines and 287,836 MVA of substation transformation capacity additions are likely to be achieved during the 12th plan,” it has said. Various high capacity transmission corridors are in various stages of implementation and most are likely to be commissioned by 2021. Darren Sproles Jersey
Higher Budgetary Support To Drive Road Builders In 2017
The infrastructure sector, considered the growth engine of the economy, started 2016 on a promising note. While the sector has not recovered from the sluggishness prevailing since 2015, certain segments like roads have witnessed a considerable pickup of late, a report by IIFL Private Wealth Management said. Higher budgetary allocation and aggressive targets by Union Road Transport, Highways and Shipping Minister Nitin Gadkari held out hope. Regulatory approval for infrastructure investment trusts and the government’s new arbitration norms were expected to ease stress. But like for other sectors, withdrawal of old Rs 500 and Rs 1,000 currency notes has brought uncertainty to the infrastructure space. Analysts still see a silver lining and anticipate a higher allocation for infrastructure and roads in the next budget. A Recap Of ‘2016’ In the Union Budget of 2016-17, capital outlays for the road transport and highways ministry were increased by 49 percent to Rs 1,03,286 crore from Rs 69,422 crore allocated in the previous year. Gadkari set an ambitious target of awarding 25,000 kilometres of road projects in 2016-17 as against 10,000 kilometres in the previous year. The minister has, however, lowered his target of building new roads, conceding that his ministry will fall short of 40 kilometres a day. Analysts feel the targets weren’t realistic but the sector could outdo previous year’s achievements. NHAI is most likely to miss its ambitious targets of initially announced 25,000 km set for the year by a huge margin on the back of delay in awarding orders and appointment of its new chairman, Yudhvir Singh Mali. However, the existing gap between deliverables and targets may narrow down since 40-50 percent of orders are awarded in the last three months of the financial year. Vibhor Singhal, Lead Analyst, Phillip Securities Pte Alok Deora, assistant vice president at IIFL, agreed that the initial target of awarding 25,000 kilometres road projects in the the current financial year was ambitious. Considering the pace of awarding projects so far, it may end flat year-on-year at 10,000 kilometres, Deora said. In the (financial) year so far, road awarding has witnessed a 7-8 percent growth in April- November 2016 over the previous year. Though the initial target of 25,000 km set by the government might be a tall ask, the sector might just be able to outdo its previous year’s performance of 10,000 km. Divyata Dalal, AVP – Institutional Equities, Systematix Shares & Stocks India Besides, the higher spends and wishful targets, implementation of announced reforms and policy initiatives kept the space abuzz. Infrastructure Investment Trusts: More than two years after SEBI issued guidelines for infrastructure investment trusts (InvITs), the capital markets regulator in 2016 allowed three companies — IRB Infrastructure Ltd., GMR Infrastructure Ltd. and MEP Infrastructure Developers Ltd. — to launch the trusts. InvIT — a good initiative, would help developers de-leverage and allow them to execute more projects. This definitely seems to be a trigger from where the investments would kick in. Alok Deora, AVP – Research, IIFL Arbitration Guidelines: In order to expedite resolution of claims stuck in arbitration for years, the government has approved new guidelines, which allow releasing 75 percent of the amount against a margin free guarantee in a situation where awards have been given by the authorities concerned. Government has done its bit to restore investors’ confidence, with release of 75% of the money in the arbitration award being the big positive for this space. This new norm is expected to provide much-needed liquidity for the infrastructure sector. Also, the government spending more and taking more policy initiatives to lift this space, given its tangible characteristics. Divyata Dalal, AVP- Institutional Equities, Systematix Shares & Stocks India Hybrid Annuity Model: To revive public-private partnerships in highway construction, the government introduced the Hybrid Annuity Model at the start of 2016. HAM has seen significant traction since the government provides 40 percent of the project cost to the developer to start work while the remaining investment has to be made by the developer. A lot of HAM projects have been awarded so far in this year and the pipeline of HAM projects remains huge. The government is betting big on it as it’s the key driver in road awarding in coming period. Alok Deora, AVP – Research, IIFL Room For Correction? The Nifty Infrastructure Index has fallen 2 percent in 2016 compared to 3 percent gains posted by the NSE Nifty50 Index. Share prices of prominent road building companies like IRB Infrastructure (down 19.5 percent), GMR Infrastructure (down 27.7 percent) and Reliance Infrastructure Ltd. (down 14 percent) have declined substantially. Analysts expect the index’s price-to-earnings ratio to correct to 15.8 times in 2017 from 20.2 times as it currently stands, indicating further downside for stocks in the index. However, the index’s price-to-book ratio is expected to rise to 1.68 times as compared to its current 1.54 times. Demonetisation Demon Prime Minister Narendra Modi surprised the nation on November 8 by demonetising old Rs 500 and 1,000 notes. While most sectors reacted negatively, the full impact of demonetisation is yet to be ascertained. Demonetisation is expected to curtail private and state capital expenditure in the infra space but spending by the central government is likely to remain strong, said Deora. Cash crunch post demonetisation led to a temporary halt in toll collection on state and national highways across the country. Major players have hinted at 75-100 percent compensation from the government for the loss incurred, IIFL’s Deora said in his report, adding that there has been no clear indication from the government in terms of timing, mode of payment and the quantum of compensation. Demonetisation may also impact traffic growth as the economic activity is likely to slow down in the near term. Tolling companies, which had seen a pick-up in traffic after two to three years of sluggish growth, now fear weak toll revenue growth. But there is also an upside. Phillip Securities’ Singhal said that though the impact of demonetisation needs to be evaluated, increased liquidity in
Hybrid annuity road projects face financial closure hurdles
Some of the road projects under the new hybrid annuity model (HAM) that attracted aggressive bidding this fiscal year are struggling to achieve financial closure as banks remain cautious, developers and analysts said. Under HAM, the government commits up to 40% of the project cost over a period and hands the project to the developer. The developer has to fund the balance with debt and equity, and is paid annuity income in instalments. The model was designed to make it safe for banks and investors. Satish Parakh, managing director at roads developer Ashoka Buildcon Ltd, said some lenders are “not happy” with the hybrid annuity model. “Some of the banks are refusing to finance on the basis of those documents, and only a few banks are coming forward for the hybrid annuity model. They have some reservations which they are discussing with the NHAI. The other part is that some companies are finding it difficult to put equity,” said Parakh said. He added the company had achieved financial closure of its HAM project. Like all public-private-partnership (PPP) projects, HAM projects too are facing issues with financial closure, said K. Ramchand, managing director, IL&FS Transportation Networks Ltd (ITNL). ITNL, which has the largest portfolio of build, operate and transfer (BOT) road projects, has bid for HAM projects in various states but not announced a win so far. Out of the 26 HAM projects awarded this fiscal, about four-five could get scrapped due to inability of the developer to invest equity or bring in debt, said an analyst, asking not to be named as he is not authorized to speak to reporters. Large banks such as State Bank of India (SBI) and Axis Bank are selectively funding HAM projects even as many companies continue to bid for and win such projects, according to this analyst. SBI and Axis Bank did not respond to email queries sent on Thursday. “Earlier, banks were slightly reluctant with funding hybrid annuity projects, especially for developers with weak balance sheets and lack of construction experience. They (banks) were taking longer time than usual to assess HAM projects as they wanted to understand the new business model. However, in the recent weeks, a lot of companies including Welspun, MEP Infra and Sadbhav have been able to achieve financial closure for their hybrid annuity projects,” said IIFL Wealth analyst Alok Deora. On 2 December, Deora had said in a report that certain small developers had failed to receive financial closure for their HAM projects, which were consequently cancelled. The government’s push for new low-risk HAM awards to kick-start private sector investments has led to the emergence of a number of smaller, regional companies that have added to the sector’s competitive intensity, according to road developers and analysts. The increase in awards of projects under the government-funded engineering, procurement, and construction (EPC) model too has driven up bidding aggression. Companies including Sadbhav Infrastructure Projects Ltd, Welspun Enterprises Ltd, and Ashoka Buildcon have been able to tie up loans and submit their financial closure details to NHAI. MEP Infrastructure Developers Ltd has been able to achieve financial closure for two of its projects with two others yet to be closed, while PNC Infratech Ltd and Dilip Buildcon Ltd are expecting to achieve financial closure by March. Some other companies such as MBL Infrastructures Ltd, APCO Infratech Pvt. Ltd, Oriental Structural Engineers Pvt. Ltd and GR Infraprojects Ltd, are yet to achieve financial closure of their won projects, according to channel checks of the firms. “A concern in the roads sector today is that there is huge aggression even though the number of players is less. The job being bid out are quite large, but theirs is no comfortable participation and instead, there is a lot of aggression. And that will lead to execution challenges,” Ashoka Buildcon’s Parakh said. Road projects in India have always been awarded in one of the three formats—BOT annuity, BOT toll and EPC. In BOT annuity, a developer builds a highway, operates it for a specified duration and transfers it to the government, which pays the developer annuity over the concession period. Under BOT toll, a concessionaire generates revenue from the toll levied on vehicles using a road. In EPC, the developer builds with government money. India has set a target to award 25,000km of road projects in FY17 under the ministry of road transport and highways and National Highway Authority of India (NHAI), compared to 10,000km achieved in FY16.
DGCA asks aircraft leasing companies to pay more tax on imported planes
In what could be a blow to the regional connectivity scheme, the aviation regulator has stalled the entry of aircraft leasing companies into India by asking them to pay higher duties on imported planes. The civil aviation ministry, which has been actively pushing for air connectivity to small cities and towns, now plans to take up the matter with the finance ministry to find a solution. According to government rules, any company importing an aircraft has to inform the regulator whether it is bringing the plane for non-scheduled operations or personal use. The rule does not mandate that the company importing the aircraft has to operate it —so, a leasing company can import aircraft in its name and lease to airlines involved in commercial operations. The duty on aircraft imported for nonscheduled operation is just 2.5 to 3 per cent, but it is steeper at 19-21 per cent for those brought in for personal use. Leasing companies, which plan to import aircraft and lease them out to local operators, have sought approval to pay duties at the lower rate. But the Directorate General of Civil Aviation (DGCA) has blocked it by arguing that these companies may avail of the lower rates but use the aircraft for personal use, as there is a precedent. “In the past, we had come across violations by operators, who import aircraft on the pretext of non-scheduled operations but use it for personal use. This way, they save a lot of money by paying less duty on it,” said a DGCA official, who did not want to be named. One cannot guarantee that these aircraft would not be used for personal flights, added the official. Barring aircraft leasing companies from entering India could hamper prospects of the regional connectivity scheme, whereby the government aims to connect unserved and underserved airports. It has decided to fix fares at Rs 2,500 per hour of flight and compensate the airlines through a subsidy for operating flight which may not be commercially viable. “We had discussions on the issue. We are writing to the revenue department and get the issue addressed,” Aviation Secretary RN Choubey told ET. He said there was a need to address the tax rule for leasing companies to shift base to India. “No leasing company would come if they are asked to pay higher duties,” Choubey said. To make the regional connectivity plan a success, the government is working to make aircraft available for scheduled commercial operators — regional operators who will launch regional flights. The government has also allowed foreign-registered aircraft to be operated in India, on the request of aircraft leasing companies. The government will open the bids to operate regional flights next week and expects the flights to start in February. Till last Thursday, the aviation ministry received bids from 60 companies to operate flights on 600 regional routes. Demetrius Harris Jersey
Bangalore International Airport: State seeks security nod
Karnataka has advised the Ministry of Civil Aviation (MoCA) to issue “security clearance“ to billionaire Prem Watsa’s proposed investment in Bangalore International Airport (BIAL) in an effort to speed up an FDI proposal that has been flying back and forth between Bengaluru and New Delhi. The traffic volumes at BIAL have surpassed the projections, calling for speedy addition of a second terminal.But the delay by the Centre could be holding up key capital investment decisions at the BIAL due to the uncertainty the indecision has created, people aware of the development said. Watsa’s Toronto-based Fairfax Group had, in March last year, announced its decision to buy a 33% stake in BIAL from GVK Group for Rs 2,182 crore ($321 million), valuing the eight-year-old airport at about Rs 6,600 crore. A month later, Fairfax signed another deal to buy 5% stake held by Flughafen Zurich AG in BIAL. The investment proposal, however, has been hanging fire with MoCA seeking one clarification after another from the state, conveying an impression that decisions over FDI proposals consumed their usual time despite the Centre’s claims of speedy clearance. Technically, a state government has no say in matters relating to security clearance to a foreign investor as it depends more on the relationship between two countries. Karnataka had declined to of fer an opinion on the grounds that the subject fell completely in the domain of the Ministry of Home Affairs. The BIAL had, on May 11, 2016, wrote to MoCA requesting that “security clearance“ be given to new investors. The MHA, for its part, communicated its nod to MoCA sometime ago, which chose to vet the FDI proposal further, and insisting on an opinion from Karnataka on security as well as other issues. The state had declined an opinion in the past, but has now chosen to advise the MoCA to communicate the MHA nod to BIAL. The MoCA ‘s delay on Watsa’s investments in airport sector has raised eyebrows because his Toronto-based group is an existing investor in India with stakes in Thomas Cook and Quess Corp. Just a few days ago, the RBI approved another investment proposal from Fairfax to pick up 51% in the Kerala-based Catholic Syrian Bank. “I don’t understand why the MoCA should drag the subject so much because Watsa is person of Indian origin who is running successful businesses in Canada and other countries,“ said R.Ramakrishnan, a practising chartered accountant. The Bengaluru airport recorded the largest growth at 22.4% in passenger and cargo traffic in the January-September period compared to other large airports by handling 11million passengers. Nevertheless, the BIAL is yet to take a call on award of contracts like airport operations, management and services possibly awaiting clarity on the fate of the FDI proposal. Randall Cunningham Womens Jersey
New Rules For On-Time Performance
Aviation regulator DGCA is preparing fresh guidelines for block hours, a yardstick for on-time performance, to remove disparity among various airlines. Block hours refer to the time taken by an aircraft to travel between cities. An airline’s on-time performance as well as facilities and financial compensation to a flyer in case of a delay are determined by block hours. The Directorate General of Civil Aviation (DGCA), which has been studying block hours from February 2016, has noted that the block hours differ from route to route, and from airline to airline. “Some airlines reported good on-time performance by showing additional block hours for a particular flight compared to same flights of competing airlines,” sources said. The ministry of civil aviation has tasked the DGCA with standardising the existing block hours for different routes. “We have been studying various routes for this purpose. The idea is to ensure that all airlines use the same block hours for the same route,” DGCA chief B S Bhullar said. Officials on the job said that traffic data of various airlines of the past five years has been collected, and is being analysed as part of the standardisation exercise. According to the sources, while the flying time between Delhi and Mumbai is approximately 1.28 hours, the block hours for the route stood at a maximum of 2.10 hours. “Some airlines show additional block hours, and because of this, they report before time, or on-time arrival despite departing late. That anomaly is being addressed by DGCA now,” said Air Passengers Association of India (APAI) president Sudhakara Reddy. Brian Dawkins Jersey
Tremendous growth potential for domestic air cargo, says Raju
There is tremendous potential for domestic air cargo growth but “somehow the jigsaw puzzle” was never pieced together, Union Minister Ashok Gajapathi Raju said as he rued that currently cargo is only a minuscule part of Indian aviation sector. Currently, Blue Dart and QuikJet are the only two domestic players operating cargo carriers. Naresh Goyal-owned Jet Airways had announced its plans to set up a cargo airline in 2015 and had even got Government’s in-principle approval for leasing of a freighter from its strategic investment partner Etihad. However, the airline later shelved the plans, citing market conditions. The Civil Aviation Minister said there is a need to motivate entities for air cargo operations. “In India, God has blessed with all types of climates, name the climate, name the produce the potential is tremendous. We are in the infancy (with regard to air cargo),” Raju told PTI in an interview. Even as the domestic passenger growth has been over 20 per cent for many months, cargo segment is lagging behind. The national civil aviation policy has also given thrust to boosting air cargo business, especially against the backdrop of rising e-commerce activities and exports. Alex Smith Womens Jersey
Pvt airlines scuttling regional connectivity scheme
Now it is confirmed that all domestic airlines, barring PSU carrier Air India, have joined hand to fail the Government’s plan to promote regional connectivity by encouraging setting up of smaller carriers. The Federation of Indian Airlines which represents scheduled carriers like Jet Airways, Indigo, Spicejet and Go Air have gone to court challenging the Government notification imposing a levy per flight to create a fund for development of regional airports. It is a paltry Rs 7500 to Rs 8500 per flight of levy that the Civil Aviation Ministry notified recently. The Government wants to take flying to the masses by making if affordable and convenient. This would ultimately lead to growth of the civil aviation sector as a whole. If every Indian in the middle class income bracket, for example, takes just one flight in a year, it would mean sale of 35 crore tickets. It would be a quantum jump from just about 7 crore domestic tickets sold during 2014-15, according to the civil aviation ministry. It is a very valid argument. Apart from the overall growth of the aviation sector ultimately benefiting the air carriers, consider the convenience for the people who are denied air travel to smaller towns and cities for lack of infrastructure like proper airfields and connecting roads. Most of the funds needed for the development of this infrastructure is, anyway, being provided by the civil aviation ministry and the state governments. The airlines are also being asked to chip in, like a small levy per flight. But these airlines have pleaded that they cannot charge extra from passengers to pay for the levy. This is a very specious plea. What if the Government charged the amount in the name of, say, the airport development fee? Indeed such a fee was charged in the past for select airports. Now it is for development of around 200 airports across the country. The issue is just about broad-basing fund sources from stake holders. All domestic carriers have huge stake in the development of the civil aviation sector. The Government’s scheme of making flying cheaper (Rs 2500 for a flight of one hour and less) will benefit all. Wendell Smallwood Authentic Jersey