InterGlobe to lag unless load factor rises: Expert
Most airline stocks have rallied purely due to linear correlation with aviation turbine fuel prices without giving due consideration to other variables like utilisation levels, infrastructure costs etc., which also eat into margins, says market expert Prakash Diwan commenting on the weak show of InterGlobe Aviation in the first quarter. It is highly competitive environment and the results clearly indicate pricing power is not yet back, he says. He points that 18-20 percent of the new routes launched are sub-optimal with less than 55 percent occupancy. Unless occupancy rates and load factors improve, investors will not prefer to enter a high-risk business at such valuations. During the first quarter InterGlobe’s load factor declined to 83.3 percent from 87.9 percent year-on-year. Mack Hollins Womens Jersey
Aviation regulator wants airlines to give weekly reports relating to new passenger-friendly rules
With new norms notified by the Directorate General of Civil Aviation (DGCA) becoming effective on Monday, fliers may now get prompt refunds on cancellations of their air tickets. In addition, the cancellation charges must not exceed the basic fare and fuel surcharge charged by carriers on a particular route. Till today, charges varied from Rs.1,500 to 100% fare of the ticket, depending upon the class, price level and the time before departure. India’s civil aviation regulator on 13 July notified significant amendments to civil aviation rules relating to refunds, cancellation charges and facilities to be provided to persons with reduced mobility. To ensure more transparency, airlines are now required to indicate the refund amount in case of cancellations. The move would come as a relief to passengers as many carriers recently increased cancellation charges. Around 680,000 passengers fly daily on 5,470 daily domestic and international commercial flights from 75 Indian airports. A senior DGCA official requesting anonymity said airlines would soon be asked to give a weekly report on how they are adhering to new rules. Womens Jersey
Next DGCA director may be from the Indian Air Force
The National Democratic Alliance (NDA) government may appoint a senior Indian Air Force (IAF) officer with the rank of an Air Marshal to head India’s civil aviation regulatory body, Directorate General of Civil Aviation (DGCA). The rationale stems from the fact that a person heading the post should have sound technical knowledge of air operations and the Indian skies. IAF officers in the past have been unsuccessfully applying for the DGCA’s top post. The post of DGCA head fell vacant as M. Sathiavathy, a 1982-batch AGMUT (Arunachal Pradesh-Goa-Mizoram and Union Territory) cadre Indian Administrative Service (IAS) officer, was on 28 July moved from the regulatory body to the ministry of labour as the secretary. A senior civil aviation ministry official requesting anonymity said that the government has already indicated to get an IAF officer, someone who is involved in air operations and air traffic control. This comes in the backdrop of the regulatory body making amendments to the civil aviation regulations besides chalking out new rules on penalties, fast refund and compensations to air passengers. Additionally, DGCA is actively involved in streamlining the strategy for the NDA government’s regional connectivity scheme that aims to develop unserved and underserved airports across the country. St. Louis Blues Womens Jersey
Oil consumption growth likely to spike this fiscal year
Oil consumption growth in the current fiscal year will likely exceed 10.9% of the previous year, if the current consumption trend continues, an oil ministry arm has said. A 7.8% jump in the consumption of petroleum products in the country in April-June, compared to 5.2% in the year-ago period, has prompted this prediction from the Petroleum Planning and Analysis Cell (PPAC). “Typically, April-June is sluggish in performance than the rest of the year. Going by the trend, it’s likely petroleum products consumption growth for 2016-17 could be better than that of last year,” the PPAC said in its monthly review. A higher fuel consumption signifies faster clip of economic growth for the country, currently growing at 7.6% annually. In April-June, the biggest consumption growth was recorded in petrol (10%), liquefied petroleum gas (7.8%), fuel oil (22.9%), bitumen (13.9%) and aviation turbine fuel (12.1%). For diesel, the most consumed petrol product in India, it rose 4.7%. Kerosene dived 7.7% following a general shift towards cooking gas and increased power availability. In June, diesel consumption grew 1.5%, the slowest month-on-month pace since July 2015, mainly because people anticipated favourable prices in May and July and shifted some offtake away from June, according to PPAC. Domestic prices follow international trends and are revised fortnightly, prompting dealers to temper order sizes on price change anticipation. Higher power availability and good monsoon, that affects road transport and lowers diesel consumption for farm pumps too contributed to lower diesel figures, the PPAC said. In June, petrol sales rose 4.4%, much lower than quarterly growth of 10%, primarily due to shifting of offtake as buyers anticipated lower prices in May and July, PPAC said. Growth in consumption of petrol was higher than diesel mainly due to increasing consumer preference for petrol-driven vehicles as the price differential has waned and policy thrust on scrapping older diesel vehicles gotten louder, PPAC said. Noah Hanifin Authentic Jersey
India Seeking Merger Model for Possible State Oil Champion
India is open to discussing a merger of some of its state-run oil producers and refiners to create a larger, stronger national firm, according to the country’s oil minister. The government is seeking the appropriate model for combining India’s state-run oil companies and hasn’t decided on any plan, Dharmendra Pradhan said in New Delhi on Monday. The combined market capitalization of India’s top eight state-owned oil and gas companies is about $80 billion, ranking a combined entity ninth among global oil firms, according to data compiled by Bloomberg. “I am open to a discussion on merging oil companies,” Pradhan said. “There are two schools of thought. Whether we have a single entity or we have entities like we have today. We should find out a way of what should be the future model.” India is set to emerge as the world’s third-largest oil consumer by the end of this year and will be the center of global growth through 2040, according to the International Energy Agency. Its upstream production is dominated by Oil and Natural Gas Corp., which operates independently of its biggest refiner, Indian Oil Corp. Shares of Indian Oil rose as much as 1.5 percent and traded up 1.3 percent to 549 rupees, the highest on record, in Mumbai as of 9:43 a.m. The benchmark S&P BSE Sensex rose 0.5 percent. The Press Trust of India reported Sunday that the government is deliberating on the issue of merging the companies, citing Pradhan. India had considered a similar proposal about a decade ago, but didn’t pursue any consolidation, R.S. Sharma, a former chairman of ONGC, said Monday. Menelik Watson Womens Jersey
BP Aims to Increase Gas From India’s KG-D6 Fourfold by 2022
BP Plc is working with its partner Reliance Industries Ltd. to increase natural gas production from the deepwater D6 block in the Krishna Godavari basin as much as fourfold by 2022, according to the chief of the British company’s India unit. The companies aim to produce 30 million to 35 million metric standard cubic meters a day of gas from the block on India’s east coast after they develop three new fields, Sashi Mukundan, head of BP’s India unit, said Monday in New Delhi. Gas production from KG-D6 averaged about 8.7 million cubic meters a day in the April to June quarter, said in a July 15 presentation. The companies are preparing to restart work in four offshore oil and gas blocks as they seek to revive development activity stalled for seven years by disputes with the government. Reliance and BP intend to withdraw from multiple arbitration proceedings against the government related to KG-D6 people with knowledge of the plan said in May. Reliance spokesman Tushar Pania declined to comment Monday on the production target. The effort to resolve disputes with the government “has created confidence for us to move forward,” Mukundan said. BP and Reliance are looking to develop three discoveries in three different fields and invest “several billion dollars,” he said. Production from the KG-D6 block, discovered in 2002, has tumbled since hitting a peak in 2010 of around 62 million cubic meters a day. The companies continued with offshore exploration activities there, while pausing development drilling because of disputes with the government over gas prices and cost recovery. Patrick Robinson Jersey
LNG buyers encouraged to rework deals amid global glut
India’s liquefied natural gas buyers are being encouraged to renegotiate long-term contracts after spot prices tumbled amid a global glut. “We have asked the companies to renegotiate the LNG deals wherever there is a possibility,” oil minister Dharmendra Pradhan said in an interview Monday in New Delhi. “I am hopeful our companies will successfully steer the negotiations.” India wants to turn an oversupply of LNG to its favour as it seeks greater use of natural gas in its energy mix and seeks to reduce the dependence on crude oil imports. India is among the first countries in Asia to renegotiate a long-term deal after the glut pushed down prices. Petronet LNG Ltd in December reworked a 25-year contract with Qatar’s RasGas Co., resulting in prices dropping by almost half. Elsewhere in the region, Japan is probing resale restrictions in most of its LNG contracts that may lead to the renegotiation of more than $600 billion worth of deals that run until almost the middle of the century. The chairman of China National Petroleum Corp., the country’s biggest energy company, said in March that it’s looking for opportunities to rework the pricing method on its LNG supply contract with Qatar. Energy basket The price of spot LNG to Asia has fallen by more than 25% during the past year. India’s LNG imports surged 59% to 8.13 million metric tons in the first five months of the year, while domestic output slipped 8%, according to data compiled by Bloomberg Intelligence. Aligning LNG contracts to current market rates can make natural gas more affordable to Indian customers as the government plans to increase regasification capacity to 55 million tons within five years, from about 21 million now, Pradhan said. “We want to increase the gas component in our energy basket,” Pradhan said. “We are building a gas grid around the country to increase the use of gas.” Pradhan on Monday also highlighted the country’s supply deals from Russia, the US, Australia and Canada. Global supply GAIL India Ltd is seeking to defer a 20-year contract to buy liquefied natural gas from Gazprom PJSC until the Russian company’s Shtokman project begins production, according to officials at the South Asian country’s biggest gas transporter, who asked not to be identified citing company policy. Petronet signed an agreement with Exxon Mobil Corp. in August 2009 to buy 1.5 million metric tons annually for 20 years from Australia’s Gorgon project, with supplies expected to begin by the end of this year. GAIL also has an agreement to buy 3.5 million tons a year for two decades from Cheniere Energy Inc.’s Sabine Pass terminal, with the supplies expected to start in March 2018. It has also booked 2.3 million tons a year from the Cove Point LNG liquefaction terminal in Maryland, which is set to commence deliveries in December 2017. Indian Oil Corp. Ltd bought a 10% stake in Petroliam Nasional Bhd’s Canadian natural gas fields and a planned export project, which will give the Indian state oil refiner the right to 1.2 million metric tons of LNG per year for two decades. India is becoming more reliant on imported oil and gas as domestic production lags demand growth. The country will be about 90% reliant on imports by 2040, up from 70% in 2014, the International Energy Agency said in its most-recent annual World Energy Outlook. The cost of those oil and gas shipments will reach nearly $480 billion by 2040, up from $110 billion today, it said. Richard Sherman Womens Jersey
CAG red-flags $1.6 billion excess cost recovery by RIL
Government auditor CAG has red- flagged $1.6 billion of excess cost recovered by Reliance Industries in the KG-D6 gas block and took note of state-owned ONGC’s gas flowing into the eastern offshore fields of the Mukesh Ambani-led firm. The Comptroller and Auditor General of India(CAG), in a report tabled in Parliament, said 831.88 sq km of KG-D6 area needs to be taken away from RIL as per the contract and cost of discoveries it had relinquished should not be allowed to be recovered from sale of oil and gas from the block. Also, cost recovery for doing discovery conformity test should be looked into, it said. CAG said November 2015 report of independent expert DeGolyer & MacNaughton (D&M) submitted on reservoir continuity between the KG-D6 and contiguous ONGC operated blocks has pointed out that gas has migrated from the blocks owned by state-owned firm to the private company operated fields. “The report indicates that as on March 31, 2015, of the gas initially in place, 44.32 per cent in Godavari PML and 34.71 per cent in KG-DWN-98/2 (both of ONGC) had migrated” to KG-D6, it said. “The report projected a higher proportion of gas migration and its production through RIL operated KG-DWN- 98/3 (KG-D6) block by end of 2019.” The government has appointed one member committee under Justice AP Shah to consider the report and recommend future action. “In case if the Ministry of Petroleum and Natural Gas accepts D&M report conclusion that RIL did draw gas from ONGC’s contiguous fields, and directs RIL to compensate ONGC for the same, it may affect the financials of KG-DWN-98/3 including cost petroleum, profit petroleum, royalty and taxes over its entire period of operation (since April 2009 when production of gas commenced from the block),” CAG said. It said many of the issue it had pointed out in the previous audits (2006-12) of the block still persist. “The total financial impact of excess cost recovery during 2012-14 on account of the earlier identified audit findings was $1.547 billion (Rs 93.0722 billion). “For the period 2012-14, additional issues of excess cost recovery claimed by the operator (RIL) were noticed, financial effect of which was USD 46.35 million,” it said. CAG had in its previous reports slammed Oil Ministry and its technical arm DGH for not exercising enough control and vigil over KG-D6 block, leading to instance of excess cost recovery. As per the Production Sharing Contract (PSC), an operator is allowed to recover all his cost before sharing profit with the government, a provision which CAG says encourages companies to inflate cost to delay profit sharing. CAG in its report tabled in Parliament today said RIL refused to connect to production system four wells it had drilled on the D1 and D3 gas field in KG-D6 block on the pretext that they would not produce adequate incremental volume to justify the additional capex spend. “Though these wells have not contributed to production from the D1-D3 field, the Operator has recovered $102.94 million up to the FY2013-14 towards their cost,” CAG said. Also, the ministry had ordered RIL to relinquish 6,198.88 sq km out of total KG-D6 area of 7645 sq km as per the contract that allowed retaining only area were discoveries are made. “However, contrary to Ministry’s directives, the Operator relinquished only an area of 5,367 sq km retaining an excess area of 831.88 sq km. The Operator also paid Petroleum Exploration License (PEL) fees of Rs 3.32 million relating to the excess retained area,” CAG said, adding that the relinquishment of the additional area retained needs to be ensured by the ministry. CAG said $63.78 million RIL got through marketing margin should be included in price of gas for calculation of royalty payable to government and profit sharing. Also, Aker of Norway, which supplies a floating oil production vessel (FPSO), was paid additional benefit of $10.13 million. DeForest Buckner Authentic Jersey
Four-lane highway at teeming Gurugram-Sohna Road delayed by 3 years
Much like the Dwarka Expressway, the development of a planned four-lane highway at the teeming Gurugram-Sohna Road will also take three more years. The 92-km road connecting Rajeev Chowk at NH 8 to the Rajasthan border in Alwar district has recently achieved national highway status. But problems came to the fore during the 25-hour gridlock on Thursday and Friday, particularly at the stretch between Rajeev Chowk and Badshahpur. FAULTY DESIGN “We took charge of the Gurugram-Alwar road last week and soon hired a consultant company to check feasibility to develop a four-lane highway,” said Ashok Kumar Sharma, project director, NHAI. The NH 248 is highly congested, especially between Gurugram and Badshahpur, owing to a faulty design from the Haryana PWD, MCG and HUDA. Experts cite the flyover at Subhash Chowk as a key example of the flawed policies of the government and civic agencies that had passed the design of the structure from Huda City Centre Road to Hero Honda Chowk in spite of the Rajeev Chowk to Badshahpur stretch on NH 248. Compared to the previous road, the NH 248 has about 100 times more vehicular traffic due to a large number of IT companies, business houses and upscale residential complexes in the neighbourhood. “The consultant company will check the feasibility of an underpass at Subhash Chowk on NH 248. Besides that, it will also look for possibilities of elevated corridors at highly congested places such as Badshahpur, Sohna town, Nuh and Ferojpur Zirka,” Sharma said. He added that company will submit its feasibility report in three months and like the other NHAI project, it is also expected to be complete in three years. The NH 248 starts from Rajeev Chowk situated on NH8 and has four lanes till Nuh, the headquarters of Mewat district. The road further towards Ferojpur Zirka and touching Alwar border still has just two lanes. Denzel Perryman Womens Jersey
Road developers step up bidding war in quest to win EPC projects
Road developers are locked again in a bruising bidding war, offering to build highways at prices that are lower than cost estimates, just months after the government offered a bailout to companies to help revive stranded road projects. Several debt-laden developers, unable to take up build, operate and transfer (BOT) projects because they are capital-intensive, have opted to bid for engineering, procurement and construction (EPC) projects, where the government pays the contractor to build the project. A total of 52 EPC road projects worth about Rs.26,700 crore have been awarded between January and June, according to data compiled by brokerage Equirus Securities Pvt. Ltd. Of these, close to 40 projects were won below the National Highways Authority of India’s estimated cost and each of the projects attracted three to 14 bidders. The government’s push for a new low-risk hybrid-annuity model (HAM), in which the state commits up to 40% of the project’s total cost to kick-start private sector investments, and the emergence of a number of smaller, regional companies have added to the competitive intensity, according to road developers and analysts. The government has been trying to resolve stressed assets in the sector by giving faster land acquisition approvals and providing last-mile funding. Last year, it eased rules for companies to exit their operational road projects. It has terminated more than 40 unviable BOT road projects spanning 7,000km lane. These projects are being re-awarded via the EPC route. Larsen and Toubro Ltd (L&T) has decided to focus solely on EPC projects. It won five awards in the six months ended 30 June, all of them below estimated costs. It won two EPC projects in Tamil Nadu in February by bidding 27% and 13% lower than the project cost suggested by the awarding authority. In March, L&T won a road project in Kerala at a bid that was 38% below the estimated project cost. Similarly, Bhopal-based Dilip Buildcon Ltd has won six contracts, which were between 13% and 31% below the estimated cost. Apart from L&T and Dilip Buildcon, firms such as PNC Infratech Ltd, Ramky Infrastructure Ltd, Ashoka Buildcon Ltd and GVR Infra Projects Ltd have won EPC road contracts in 2016. The NHAI, which invites bids from developers and awards them to the lowest bidder, is the sole agency responsible for the development of national highways. Projects are also awarded by the ministry of road transport and highways and states. Infrastructure developers, weighed down by debt, are seeking to monetize dozens of highway and power projects to repay creditors. Many are taking on state-funded EPC projects to pay their interest and other costs and to grow their order book. Companies with weak balance sheets that do not support investing in BOT or HAM projects are bidding aggressively for EPC projects, said Devam Modi, an analyst with Equirus Securities. “This makes them bid below the NHAI cost, and this will impact margins, but it is difficult to say how much they will lose as of today.” L&T, however, said it has been able to win projects at lower costs due to better planning, design, and engineering. “It has nothing to do with competitive intensity. We do not want to improve market share at the expense of margins,” said chief financial officer R. Shankar Raman. While Dilip Buildcon acknowledges intense competition, it does hold NHAI’s project cost as an accurate metric. “Every state has a different cost and often cost estimates are not accurate… Competition has definitely increased. From four bidders in 2014, there are seven-eight bidders in EPC projects. But a lot depends on a company’s cost structures and their target for contracts,” said Rohan Suryavanshi, head of strategy and planning. The shift towards awarding projects under the HAM model this fiscal will heighten competition for EPC projects and benefit companies with financial muscle because of moderate competition for HAM projects, Edelweiss Securities Ltd analysts Parvez Akhtar Qazi and Rita Tahilramani wrote in their 27 July report. “The shrinking pie of EPC projects (expected to more than halve in FY17 from about Rs.40,000 crore in FY16) is likely to result in intense competition for such projects,” they wrote. In contrast to EPC, all the 25 HAM projects between January to July this year were awarded above the estimated project costs. Many of these projects had nine to 13 bidders each. MEP Infrastructure Developers Ltd along with partner Sanjose India Infrastructure, Sadbhav Infrastructure and MBL Infrastructures Ltd have won the most number of projects under HAM so far this calendar year. A total of 50 HAM projects are to be awarded in fiscal 2017. EPC projects formed the bulk of awards in the past two years; this year, however, most projects have been awarded on the HAM model, said Vasistha Patel, executive director at Sadbhav Infrastructure Projects Ltd. “This has led to aggressive bidding for the limited number of EPC projects… In EPC, we earn margins of 11-12%, while in BOT, they are naturally a little higher,” he said. Sadbhav had also bid 3-5% below the estimated cost for some projects, Patel said. India has set a target to award 25,000km of road projects in FY17 under the ministry of road transport and highways and NHAI, compared to 10,000km achieved in FY16. Randall Cunningham Authentic Jersey