India gets six more weeks to respond to Cairn Energy arbitration
India has won a six week extension for replying to USD 5.6 billion claim sought by British oil explorer Cairn Energy plc for being slapped with a Rs 29,047 crore retrospective tax demand. Cairn had in June field a 160-page Statement of claim before a three-member international arbitration panel seeking quashing of the retrospective tax demand on a decade-old internal reorganisation of its India unit and sought USD 5.6 billion in compensation. India was to respond to that Statement of Claims by this month end but at a hearing earlier this month, the arbitration panel gave it time till mid-January to file the response, sources privy to the development said. The government had sought putting on hold the arbitration initiated by British oil explorer against the Rs 29,047 crore retrospective tax demand and instead wanted a parallel arbitration initiated by Vedanta Resources to be taken up first. Sources said the arbitration panel did not clearly give a position on the Indian government’s demand but gave it more time to file the response. The government using retrospective tax legislation, had in January 2014 issued a tax notice on Cairn Energy for alleged capital gains it made on a 10-year old internal reorganisation of its India unit. Three months later in April 2014, it imposed a tax demand of Rs 20,495 crore on Cairn India, the UK firm’s erstwhile subsidiary for failing to deduct tax on the capital gains. Cairn Energy and Vedanta, which had bought Cairn India from the Scottish firm in 2011, had initiated separate arbitrations against the tax demands. Cairn Energy had initiated the arbitration in March 2015 and the three-member arbitration panel had been constituted. But at a hearing last month, the government contended that the proceedings should be put on hold, sources said. Its counsel argued that the government wants the arbitration initiated by Vedanta to be taken up first. Sources said the counsel had also made an application seeking more time to file reply to Cairn Energy’s demand for USD 5.6 billion in compensation. Sources said that in the Vedanta arbitration, the government may contend that tax issues cannot be arbitrated under bilateral investment protection treaty and once it wins a favourable verdict there, it will use the same to quell Cairn Energy’s plea as well. A three-member arbitration panel headed by Geneva-based arbitrator Laurent Levy began hearing Cairn Energy’s plea against tax demand in May and the company filed its ‘Statement of Claim’ in late June. The British firm challenged the tax assessment by seeking an international arbitration under the UK-India Investment Treaty, which unlike the Dutch treaty provides for resolution of tax issues. The UK telecom firm Vodafone has initiated arbitration on a separate retrospective tax under the Dutch treaty. Derek Dorsett Authentic Jersey
Wind up Vijay Mallya’s Kingfisher Airlines: Karnataka High Court
In yet another jolt to beleaguered liquor baron Vijay Mallya, the Karnataka High Court on Friday ordered winding up of his now-defunct Kingfisher Airlines Limited for non-payment of dues to a UK-based firm. Pronouncing the judgement, Justice V Kothari observed that since KFA did not pay up dues to Aerotron, the court was ordering winding up of the airline company. “Admittedly the said amount has not been paid within the time provided in the agreement between the contending parties or even thereafter. Thus, satisfied that KFA was unable to pay its debts, the court orders the winding up of the airline company,” Justice Kothari said. As much as Rs 35 crore was due to be paid by KFA to Aerotron, for which an agreement was entered into between the two companies on February 24, 2012, whereby KFA had acknowledged its liability to pay the outstanding amounts in instalments spread over several months between March and October, 2012. Pierre Turgeon Authentic Jersey
Exorbitant air fares: No limit for metro routes as regional fares capped
Is the airline pricing mechanism fair and transparent in India? Why do people booking at the last minute – for emergency travel specially – have to pay a bomb? Well, the easy answer is that last minute bookings will mean most seats on a flight are already full and therefore, as per flexi-pricing rule followed by airlines, you end up paying a hefty premium for coming on board at a late hour. But how much premium is justified? And who decides if this premium is fair? According to data complied by online travel aggregator Makemytrip, a one way Delhi-Mumbai air ticket would have cost you a neat Rs 46,973 in September this year. Bengaluru-Delhi would have cost you Rs 46.906 in the same month. These are peak prices, the maximum that has been charged on these sectors in that month. The minimum fare during the month was Rs 2,198 on Delhi-Mumbai flights and Rs 2,395 on Bengaluru-Delhi flights. It is clear that peak pricing is about 20 times the lowest fare. As of now, there is no control over how much premium an airline can charge for last minute bookings. Civil Aviation Minister A Gajapathi Raju said in a written reply in Lok Sabha yesterday that airlines are free to fix “reasonable” tariff under sub-rule (1) of Rule 135, Aircraft Rules 1937 having regard to all relevant factors including “cost of operation, characteristics of service, reasonable profit and the generally prevailing tariff.” He also said that airlines remain compliant with the regulatory provisions of Sub-Rule 2 of Rule 135 as long as the fare charged by them does not exceed the fare established and displayed on their website. Dragan Bender Womens Jersey
No plan to regulate surge pricing for airlines – Govt of India
The central government has said that it has no plans to impose any limits on the fare charged by airlines in India. The clarification has come in the context of demands in certain quarters that airlines will be the next to see curbs on surge pricing after such limits were placed on taxi services such as Uber. Last week, the Karnataka High Court had dismissed a petition by Uber that had argued that state governments did not have the right to control surge pricing by cab companies. Like airlines, Uber and Ola have different fares depending on the demand. When demand is higher, so are the fares. States like Karnataka and Maharashtra have placed curbs on the maximum fares that taxis can charge. Karntaka, for example, has imposed a limit of Rs 19.5 per km for an air-conditioned cab and Rs 14.5 per km for non-ac cabs. There was speculation that since airlines also work on the same model, they too would see limits placed on the airfares. A ticket between Bangalore to Delhi can vary from around Rs 2,500 in times of low demand to as much as Rs 40,000 in times of heavy demand. Ozzie Newsome Authentic Jersey
Erumeli airport will be counter-productive: Experts
The State government’s new initiatives for a greenfield airport at Erumeli has surprised many in the aviation sector. For, they feel that the State’s urgent requirement is a string of airstrips or two-tier airports capable of ferrying passengers and tourists across the length and breadth of the State. Kerala is the only Indian state having four international airports in a small radius. Experts opine that rather than benefiting the aviation sector even slightly, setting up another international airport in a nondescript region will, to some extend, badly affect the performance of existing airports in the State. Speaking to ‘Express’, a senior official attached to the Kochi-headquartered Air India Express, the low-cost arm of Air India, said Erumeli was a town that came to life for around 68 days a year, when the Sabarimala pilgrim season began. “An airstrip or a small domestic airport capable of handling smaller aircrafts is enough to cater to the needs of Sabarimala pilgrims,” he stated. Cameron Johnston Jersey
Enhancing Regional Air Connectivity is top priority: Aviation Minister
The Indian civil aviation industry is exploring all possibilities for capacity expansion of leading airports in the country as well doing its best to make sure that the regional air connectivity is accomplished as per its UDAAN initiative, Ashok Gajapathi Raju Pusapati, Union Minister of Civil Aviation, said today at the inauguration of the two-day Aero Expo India-2016 organized by the PHD Chamber of Commerce and Industry under the patronage of Ministry of Civil Aviation. Present on the occasion were Jayant Sinha, Minister of State, Ministry of Civil Aviation and Rajiv Nayan Choubey, Secretary, Civil Aviation along with other dignitaries from India and overseas. Raju also stressed that though the domestic civil aviation industry has been growing at a rate of more than 20 per cent in the last few years, admitting that higher passenger growth in civil aviation sector is still a challenge for the government which could be won with addition of capacities in India’s leading airports. Speaking on the occasion, Sinha asked civil aviation industry to grow in such a manner so that its passenger traffic, currently estimated at about 150 million for domestic and overseas sector multiplies manifold and catches on pace with the air traffic of China which presently is calculated at 500 million per annum. In order to achieve this objective, the ministry has been adopting three pronged strategy under its UDAAN commitment which includes expansion of airports capacities, ensure regional connectivity and equip the air passenger with better level of satisfaction and experience under its Air Sewa initiative, emphasized the minister adding that the government would do all possible to transform the civil aviation sector. Choubey reiterated the government commitment for higher growth of civil aviation sector with all possible government’s initiatives in partnership spirit, adding that by December 2016 dozen of schedule commercial operations could begin to connect small towns in the country under its regional connectivity drive. Anthony Brown Authentic Jersey
Boeing to invest in new factory in India
Aerospace major Boeing will invest in a brand new factory in India and create an entire aviation ecosystem as far as its ‘Make in India’ plans for its fighter aircraft the F/A-18 Super Hornet are concerned, said the company’s F/A-18 Program vice-president Dan Gillian. He was speaking to a visiting Indian media team now in the U.S. The multirole, dual seat aircraft is reported to be of interest to India, and now features in “Make in India” offers. He said that in the India plan, huge opportunities exist in the supply and manufacture of avionics, engine parts and landing gear components. Further, with improvements in displays, which now worked like an iPad, there were prospects in the fields of graphics too. Adding to his remarks, Boeing India’s president Pratyush Kumar called it a “crown jewel project” which includes indigenisation and tapping into a supplier chain of vendors. This will attempt to mirror the system around the Super Hornet production line at St. Louis, U.S., which is now supported by 800 vendors in 44 states and employs 60,000 people. Mr. Kumar added that with this plant, India could not only look forward to manufacturing the Block II Super Hornet and even an Advanced Super Hornet but also help it design and build an Indian-made ‘next generation’ fighter. According to him, this would also help advance the country’s aerospace capabilities. Mike Nugent Authentic Jersey
Govt softens stand in case against Reliance Industries
The oil ministry has decided not to take any coercive action to recover the $1.55 billion it has demanded from Reliance Industries Ltd (RIL) as compensation for producing gas allegedly at the expense of state-owned Oil and Natural Gas Corp. (ONGC) from a shared offshore reservoir while the dispute remains under arbitration, an official aware of the development said. Keeping the demand, raised on 4 November, in abeyance is a departure from the approach the government had taken in several past disputes that have gone into arbitration, including with RIL and Cairn India Ltd. The development will avert an immediate financial impact on RIL, one of the largest private investors in the oil and gas sector. The move is also set to signal certainty of the regulatory regime governing resolution of disputes in the natural resources sector, and is in line with the Modi administration’s intent to improve the country’s track record on enforcing commercial contracts, an indicator in World Bank’s ease of doing business ranking. The oil ministry has been campaigning for investments into hydrocarbon exploration and has set a target for reducing oil and gas import dependence by 10 percentage points to 67% by 2022. The ministry raised the demand after the Justice A.P. Shah panel, which looked into ONGC’s claim of gas flow between the neighbouring fields of the two companies, recommended on 31 August that RIL should compensate for the “unfair enrichment” it had by way of retaining the gains of gas flow into its block KG-DWN-98/3 (KG D6). “Recovery of the compensation will be kept in abeyance. There is little sanctity in arbitration if coercive measures are taken simultaneously,” a person briefed about the oil ministry’s position said on condition of anonymity. An email sent to RIL on Thursday remained unanswered at the time of publishing. This contrasts with the approach the government had taken earlier. When gas price was raised by 33% to $5.61 per million British thermal unit on 18 October 2014, the government insisted that since an arbitration with Reliance was pending since November 2011 on recovery of cost of gas production, the incremental revenue from price hike should be kept in an account maintained by GAIL (India) Ltd till legal proceedings are over. That arbitration is still on. Also, the government had in May 2014 attached the residual stake of 10% that UK’s Cairn Energy Plc holds in Cairn India Ltd in relation to a tax dispute arising from the controversial 2012 retrospective amendment to the Income Tax Act. That dispute too is in arbitration. Dispute resolution is one area the government is working on to improve investor interest in the country’s sedimentary basins, the entire unexplored part of which will be opened up for bids next year under a new open acreage policy. Director General of Hydrocarbons Atanu Chakraborty told Mint in an interview published on 13 October that the upstream regulator was planning to set up a portal to facilitate communication among stakeholders in the industry that will help in reducing disputes. At the moment, there is no such mechanism for companies operating different blocks which are adjacent to one another. According to Kalpana Jain, senior director, Deloitte in India, prolonged disputes do not augur well for the natural resources sector considering the high risk and capital-intensive nature of the industry. Maliek Collins Authentic Jersey
Indian Oil loses market share in bulk diesel, ATF
Indian Oil Corporation Ltd (IOCL), the country’s largest refiner and marketer, has lost market share in bulk diesel and aviation turbine fuel (ATF) while Reliance Industries, Essar Oil, Bharat Petroleum Corporation Ltd (BPCL) and Hindustan Petroleum Corporation Ltd (HPCL) have gained in these segments. IOCL, still the market leader in the bulk diesel sales segment, has in the past two years seen its market share drop from over 80% to over 70% now. “Industrial sales have become a challenge due to entry of new players. Earlier we were the only player in the market with majority share. But now we have private players as well and so our share has dropped,” an IOCL official said on condition of anonymity. He said IOCL is competing aggressively and trying to match prices with the private players. “We have list volumes but can’t afford to keep losing. Besides, we have the infrastructure and are most consistent suppliers. That will always work in our favour.” IOCL did not reply to an email sent on Wednesday. Moneycontrol.com on 18 October quoted a CLSA report as saying that among PSUs, IOC had seen the biggest loss in market share in retail diesel (around two percentage points in two years) and in bulk sales by around 10 percentage points in two years as competition increased. The government had in 2013 deregulated the sale of bulk diesel. Public sector companies—Indian Oil, Hindustan Petroleum and Bharat Petroleum—were meeting almost the entire requirement for bulk diesel users until 2013. Of the total diesel sales in the country, around 20% are in bulk. Bulk customers fall in two categories—defence, railways and state transport undertakings which form 60% —and industries like power plants, cement plants and chemical plants etc which form the rest. Diesel sales are the mainstay for all fuel retailers. “In bulk diesel and ATF, IOCL has lost market share. This business is basically based on tenders. So sometimes it happens and it will continue to happen that you win a significant tender and your volumes are immediately added. Somebody bids aggressively and you lose the volumes. So, I think these are something which will continue to happen as far as the bulk diesel segment is concerned and this may change from quarter-to-quarter,” AK Sharma, IOCL’s director finance told analysts in a conference call post second quarter earnings on 28 October. Bulk consumers include state-run bus transport corporations, the Indian Railways, and small and medium-size enterprises that use gasoil to run their facilities. They buy fuel directly from refineries. Private fuel retailers—Essar Oil, Reliance Industries and Shell India—form less than 10% of India’s fuel retail business. Government-owned companies—IOC, HPCL and BPCL—dominate the fuel retail business, with a more than 90% share. In the past, diesel prices have been controlled by the government due to the sensitive nature of the product as an auto fuel and its impact on inflation. RIL said ATF sales volume grew by 31% during the second quarter over the last year and it re-secured its customer base with an over 4.5% market share post deregulation in the bulk diesel segment. Bulk marketing initiatives contributed to domestic market share gains, RIL told analysts in a presentation. It added that RIL had a leading market share in 10 out of 25 airports where it operates. “Award for 30 Railway Consumer Depots (RCDs) under a new Rate Contract with all India share-out at 11.6% for diesel requirement of Indian Railways,” RIL said. It has also accelerated expansion of its network in Southern India. Essar Oil, BPCL and HPCL hold over 2% market share in the bulk diesel segment. BPCL and HPCL did not reply to an email sent on Wednesday. “IOCL had always been the powerful retailer in the market so with the opening of the segment, they are bound to lose market share. BPCL has been growing and we are getting aggressive on the segment,” said a BPCL official on condition of anonymity. “Right since 1960s the entire government’s business was with IOCL and thus the company had 100% share in the bulk diesel segment. After deregulation, most state utilities went in for a tender system which saw private players participate and end IOCL’s monopoly,” said the head of the industrial and commercial segment at one of the oil marketing companies on condition of anonymity as he is not allowed to speak to the media. “When it comes to Railways and state-run utilities, it will be difficult for private players to penetrate that as public sector companies have superior infrastructure and reach. Besides, they look at supplying fuel at an all India basis. Newer players however, may be able to capture markets in and around their refineries,” said an industry official on condition of anonymity. RIL and Essar Oil have refineries in Gujarat and are aggressively marketing in the Western region. Minnesota Vikings Authentic Jersey
Petroleum ministry may put brakes on railways’ crude oil import plan
The Indian Railways has been denied approval by the ministry of petroleum and natural gas to import and refine crude oil. The national carrier’s plan was to import 500,000 tonne of crude oil on a pilot basis as part of its strategy to import and refine crude oil on its own to reduce fuel bill by around Rs.3,000 crore annually. Given low crude oil prices, the Indian Railways sought permission from the petroleum ministry to import crude oil and refine it at state-run Indian Oil Corp. Ltd’s (IOC) refineries. The strategy included selling other refined products extracted from the crude through IOC to garner additional revenue, as reported by InfraCircle on 2 September. “The petroleum ministry is not agreeing. We had sought permission to import 500,000 tonne. Its (petroleum ministry) argument is that it did not give permission to the ministries of defence and aviation either to import crude oil. It looks like it is not happening, though the railway minister’s letter is yet to be replied by the petroleum ministry,” said a senior railway ministry official requesting anonymity. Diesel expenditure is the second-largest component of the railways’ revenue expenditure. The railways consumes 2.6 billion litre of diesel, costing around Rs.20,000 crore annually and accounting for almost 3.2% of the total diesel consumption of India’s transportation sector. The national carrier spends around Rs.30,000 crore on energy bill annually. “We have communicated it to the ministry of railways that it shall be difficult to give permission due to a lot of issues. We are yet to send them an official letter. The matter is still is process and is being discussed,” said a petroleum ministry official who also did not want to be named. Queries emailed to the spokespersons of the ministries of railways and petroleum on 17 November remained unanswered. According to experts, many countries follow the practice of unbundling refining from the downstream activities such as marketing. “As a practice, in countries with competitive markets, refining is unbundled from supply and trading. Crude is procured and supplied to refineries to refine for a charge who in turn supply products at gate. New Zealand and Kenya are good examples. Entities who cannot buy all products can find the method challenging though,” said Deepak Mahurkar, leader-oil and gas industry at PwC India, a consultancy. The national carrier estimates its energy demand to triple by 2030 to 49 billion units of electricity. The national carrier is saddled with falling revenues and non-availability of funds and is looking to reduce costs. The railways capital outlay for the financial year 2016-17 is Rs.1.21 trillion compared with around Rs.1 trillion in the last budget. Any savings will help the railway which plans to invest Rs.8.5 trillion in the next five years. Alex Iafallo Jersey