Jet Airways waiting FIPB clearance for QIP
Jet Airways, the Naresh Goyal promoted airline, is eagerly awaiting clearance from the Foreign Investment and Promotion Board (FIPB) to raise $400 million through qualified institutional placements (QIPs).
 
Last week, the government deferred Jet Airways’ proposal to issue 79.2 million fresh shares at a price of Rs252.50 per share to raise $400 million through the QIP route.
 
"A meeting has been scheduled on 30th October to address our case for the FIPB clearance, along with a couple of other airlines," said an official from the carrier. Expecting a positive outcome from the meeting, Jet hopes to raise the funds by 3rd November, the official added.
 
The airline had planned to raise the funds from foreign institutional investors (FIIs) as the appetite for domestic investment in the aviation sector in India is not strong. Jet Airways has a consolidated gross debt of $3.1 billion, including $2.2 billion of aircraft debt. Its current payment obligations amount to about $330 million that includes repayment of debt, payment to creditors and pending obligation to SICCI towards Jetlite. After buying Sahara Airlines from Sahara group, Jet Airways renamed it as Jetlite.
 
For the quarter to end-September, Jet Airways reported a net loss of Rs4.10 billion from Rs3.80 billion as its revenues fell 27% to Rs23.80 billion from Rs32.60 billion, same period last year. The carrier has had to suffer a loss of Rs800 million due to a five-day pilot’s strike in September that resulted in close to 1,300 domestic flights and close to 200 international flights being cancelled.
 
"Domestic air traffic appears to have started reviving in the last few months based on recent traffic data. This, along with the peak season impact in third quarter, will help airlines to improve yields, which otherwise had been severely impacted due to the recession and lean season impact in second quarter," Jet Airways said in a release.
 
The company is planning to cut costs across its operations to improve its revenues. "We expect unit costs to be down by 10% year-on-year across all fields excluding fuel," the official added.
 
Jet Airways said that during the quarter, fuel prices increased by 17.4% as compared to the April to June quarter and this led to an additional cost impact of Rs1.10 billion.
 
IDFC-SSKI Securities Ltd in a report said, "With the macro-environment turning optimistic and the cost curve of the industry at its bare bones, we expect the cash losses of Jet to get limited, marking the beginning of a turnaround. However, with consolidated debt at $3.1 billion and payment obligations at around $330 million, capitalisation concerns continue to dominate. Jet's ability to raise funds through a QIP, sale and lease back of assets and sale of its land bank remains a critical moniterable going ahead."
 
During the quarter, Jet Airways reported revenues of about $35.5 million from its lease business. However, six out of its total nine aircraft currently on lease with various operators in the Gulf are expected to come off from September onwards. As per media reports, Jet was in discussions with Oman Air and Etihad to lease out two of its Boeing 777 wide-body airplanes.
 
"We are looking at expenses involved in each comparable item specifically for Jet Konnect. For example, the enhanced vision systems (EVS) costs are irrelevant. Cost cutting in fuel consumption, engineering costs and such other fields would be considered," said Saroj K Datta, executive director, Jet Airways.
 
Jet Konnect, which operates 130 flights daily, is the carrier’s no-frills all economy class service in key domestic routes and is designed to meet the needs of the low fare segment.

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Fertiliser sector will be starved for gas
The fertiliser sector has been hit by another blow. The Empowered Group of Ministers (EGOM), headed by finance minister Pranab Mukherjee, in a fresh gas allotment plan, has allocated maximum of amount of gas available from the KG Basin to the power sector. NTPC and other power producers will get 13 million cubic meter of gas per day (mscmd) on firm basis and 12 mscmd on fallback basis.
 
Refineries, which were not in the priority list, will get 5 mscmd on firm basis and 6 mscmd on fallback basis. This will go to Reliance Industries Ltd. Fertilisers will get only 0.178 mscmd (against its demand of 20 mscmd) and steel will get only 0.44 mscmd. Fallback basis will be calculated only after RIL’s excess production rather than specified quantity of assured production.
 
In fact, in its previous policy, the fertiliser sector was the first priority for gas allocation and then came the steel and power sectors. There was no priority for refineries. But since new EGOM was appointed, power became the first priority and refineries are the second in priority. That is the reason why power sector is given bulk of new gas availability. US Jha, chairman of Rashtriya Chemicals & Fertilisers, told Moneylife that “as a fertiliser unit RCF expects gas allocation.” But he is not aware of the new allocation.
 
Fertiliser companies based on natural gas could be hit by a major crisis if they are not given natural gas, which is used as a fuel and raw material. Already eight fertiliser units in Barauni, Sindri, Haldia, Gorakhpur, Talchar, Ramagundam, Korba and Durgapur have shut down. On an average, about 950 to 1,000 cubic metres of gas are used for each tonne of fertiliser. Around 20% of natural gas is used as feedstock and 80% is used as a fuel. If gas is not made available to fertiliser companies, more units may face closure and that may in turn see sharp rise in fertiliser imports and subsidies. Fertiliser subsidies were around Rs 46,000 crore in 2007-08 and are likely to cross Rs 1,00,000 crore this year.
 
In addition to natural gas, fertilisers can be made from heavy oil and coal. Heavy oil and coal options are very expensive as compared to natural gas. Heavy oil conversion to fertiliser plant will mean 30% more energy and coal conversion to fertiliser plant will consume 70% more energy. Investment cost in heavy oil and coal plants are also very expensive. Heavy oil plant is 40% more expensive and coal-based plant is 140% more costly. Production cost is also very high, as compared to the cost of natural gas. Production cost of fertiliser through heavy oil is 20% more and for coal it is 70% more. So if natural gas is not made available to fertiliser plants, cost pressure on other options will create huge losses for the country.  

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CVC recommends major penalty proceedings against 111 officers
The Central Vigilance Commission has advised initiation of major penalty proceedings against 111 officers from the government's various departments and State-run or public sector units (PSUs). The Ministry of Railways tops the list with 24 officers, followed by Govt of National Capital Region of Delhi, Municipal Corp of Delhi (MCD) and State-run banks with 19, 15 and 14 officers, respectively.
 
The commission also advised imposition of major penalty against 70 officers. This list is dominated by state-run or public sector banks (PSBs) with 11 officers, Central Board of Excise and Customs (CBEC) with eight officers and MCD with seven officers. The list includes six from Department of Telecommunications, five each from United India Insurance Co Ltd and Ministry of Defence, four each from Kendriya Vidyalaya Sangathan and Ministry of Railways, three from Central Board of Direct Taxes (CBDT), two each from National Insurance Co Ltd, Central Coalfields Ltd, Central Public Works Department (CPWD) and Delhi Development Authority (DDA), while one officer each from Chandigarh Administration, CRPF, BSF, DTL/IPGCL, Department of Health, Gas Authority of India Ltd, LIC, Ministry of Information Technology and Ministry of Urban Development are also named.
 
During September, the Commission disposed 1,101 cases referred to it for advice. It sent 144 cases for investigation and report and the rest 987 cases for necessary action. The Chief Technical Examiner's (CTE) Organisation submitted intensive examination reports in six cases during September of which two were in civil works, three in electrical and one in stores or purchase. The intensive examination of the CTE Organisation resulted in recoveries of Rs32.10 crore during the month, the commission said in its report.
 
On the commission’s recommendations, the competent authorities issued sanctions for prosecution against 26 officers including 18 from CBEC. Major penalty was imposed on 77 officers. These included 16 from PSBs, 14 from Railways, 7 from MCD, 3 from DDA and one each from CPWD, Dept of Telecommunications, Calcutta Port Trust, Central Coalfields Ltd, Northern Coalfields Ltd, Bureau of Indian Standards (BIS) and CBDT.
 
On the basis of advice tendered by the commission, stiff major penalty has been imposed on two officers from Andhra Bank while four senior officers, of the rank of joint secretary, equivalent and above were punished during the month. The punished officers included three from Department of Personnel and Training and one each from Ministry of Home Affairs and BIS.
 
The commission said it is deeply concerned over continuing delays in filling the post of chief vigilance officer (CVO) in several key organisations like Delhi Transport Corp, Kochi Shipyard Ltd, Bharat Coking Coal Ltd (BCCL), Indian Renewable Energy Development Agency (IREDA), Food Corp of India (FCI), Employees' Provident Fund Organisation (EPFO), Kudremukh Iron Ore Company Ltd (KIOCL) and Ircon International Ltd (IRCON).
-Yogesh Sapkale [email protected]

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