17 Dec 2008;dailypioneer.com:New Delhi: With jet fuel prices going down, the Government on Tuesday asked airlines to cut fares to boost falling passenger traffic.
“When ATF (aviation turbine fuel) prices have come down, so should the fares,” said Civil Aviation Minister Praful Patel.
“In the past when airlines were in difficulty, we have helped them in giving an extra line of credit, staggered repayment of their dues and abolished customs duty on ATF.
“It is now imperative for the airlines to respond to the situation, and reduce fares,” the Minister said in reply to a question.
Exuding confidence that the fares would come down in the coming weeks, Patel said Air India officials had informed him that they were working on reducing air fares in the near future.
This is the third time in four weeks that the Civil Aviation Minister has asked air carriers, including Jet Airways and Kingfisher Airlines, to cut fares in response to the government’s support to the industry.
State-run oil companies on Monday slashed jet fuel prices by over 11 per cent, the seventh straight cut since the price soared to an all-time high of Rs 71,028.26 per kl (in Delhi) in August.
Apart from abolishing congestion charges of Rs 150 and reducing the high fuel surcharge by Rs 400, the carriers have remained non-committal on cutting fares.
Jet fuel accounts for about half the operation costs of airlines in the country.
Earlier this month, Air India was the first to reduce fuel surcharge on passenger tickets by Rs 400, a move that was followed by Jet and others.
17 Dec 2008;business-standard.com:Swaraj Baggonkar:Mumbai: Tata Motors, the country’s largest automobile company, may tap its vehicle loans to raise funds for working capital and refinancing of loans for Jaguar and Land Rover acquisitions, investors and analysts said.
Tata Motors may need to tap its estimated Rs 8,000-crore car loan pool to raise cash for running its factories as sales of vehicles slow and inventories pile up, a recent report released by Enam Securities said.
With banks turning shy in extending loans and unsold stock climbing, the company’s immediate concern is to generate cash to meet the working capital requirements.
Tata Motors declined to comment on the possibility of bundling out the vehicle loans. “We do not have any comments to offer. As a matter of policy, Tata Motors does not comment on speculation,” a company spokesperson replied in response to a detailed questionnaire.
The Mumbai-based auto maker’s corporate credit rating was recently cut one notch to ‘BB’ from ‘BB-’ by Standard and Poor’s and placed on credit-watch with negative implications because of faster than expected deterioration in the automobile market conditions.
Tata Motors’ sales in October and November fell by 20 per cent and 30 per cent respectively, the credit rating agency said in its report released last week.
The downturn in the domestic automobile sector, which is one of the worst in the past seven years, has forced several players to cut production, which in some cases has been as much as 50 per cent.
The company could liquidate its loan portfolio in part or full to fund any shortfall in working capital, the report said. Reeling under cash crunch, Tata Motors for the first time in 13 years, recently unveiled a scheme to raise money through a public deposit plan offering 11 per cent interest for a period of three years. The company is raising Rs 2,700 crore through the scheme.
Tata Motors may sell the vehicle loans — to generate cash — to some of the group companies, analysts who Business Standard spoke to said. Banks have been wary of expanding their vehicle financing portfolio and may be reluctant to buy additional loans.
Tata Capital, a group company of the Tatas, is slated to raise Rs 1,000 crore to fund its expansion plan. Tata Capital provides services in areas such as capital market, housing finance and vehicle financing.
16 Dec 2008;dailypioneer.com;Rakesh Bihari Jha:New Delhi: Toyota Kirloskar Motor (TKM) on Monday said it has reduced its production by 30 per cent in the month of December to fight slowdown. But the company maintained that its investment plan of Rs 3,200 crore for India is on track and the company would launch CNG version of Innova by January-end
“It’s a tough year for the entire auto industry and TKM is no exception. We will reduce our production capacity by 30 per cent for the month of December and would review the same in January whether to stick with the reduced production target or go back to normal production course,” said Toyota Kirloskar Motor Managing Director Hiroshi Nakagawa.
TKM had announced a sales target of 60,000 units for 2008 and it sold 54,181 cars in 2007 in India. The company produced 2,886 units in November.
“Toyota has put on hold all investments for expansions, except India as we believe that fundamentals of the economy is good and the market would pick up in the second half of 2009,” added Nakagawa. TKM is setting up its second production plant in Bangalore at an investment of Rs 3,200 crore.
“Money is no problem even in this tough time. We are investing through internal accruals, and may be some portion will be raised from the market and banks,” added Nakagawa.
The company on Monday launched first of its kind one hour express maintenance service in North India at MGF Toyota at Gurgaon. Apart from its investment plans, TKM is also going to launch CNG version of Innova in new year. “Currently, we are conducting the trial run of CNG Innova and hope to launch the same by the end of January, 2009,” TKM Deputy Managing Director Sandeep Singh said.
16 Dec 2008;dailypioneer.com:New Delhi: India’s crude oil import bill has swelled by over 71 per cent to $60.34 billion in the first seven months of current fiscal on account of higher international oil prices.
The nation imported 76.2 million tons of crude oil for $60.34 billion (Rs 2,61,759 crore) in April-October this year as opposed to 70.64 million tons imported for $35.17 billion (Rs 1,42,152 crore) in the same period last year, according to latest data available from Petroleum Ministry.
The higher outgo was due to international crude oil prices soaring to an all time high of $147 a barrel in July. Even though the prices fell below $50 a barrel level since then.
Besides crude, the country also imported 11.6 million tons of petroleum products, mainly naphtha, fuel oil and LPG, for $10.89 billion (Rs 49,231 crore). India shipped 12.67 million tons of products last year for $7.54 billion (Rs 30,603 crore).
This year, the nation imported 3.13 million tons of naphtha for $3.08 billion, 2.11 million tons of fuel oil for $1.64 billion and 1.31 million tons of LPG for $1.18 billion.
While imports rose, exports declined to 21.25 million tons for $19.53 billion (Rs 89,721 crore) this year from 23.71 million tons outward shipments for $14.82 billion (Rs 60,163 crore).
Diesel exports of 7.67 million tons fetched $7.9 billion while 3.61 million tons of fuel oil exports got $2.09 billion.
Other products exported included petrol (3.18 million tons for $3.04 billion), naphtha (4.2 million tons for $3.81 billion) and jet fuel (1.99 million tons for $2.17 billion).
Net imports (crude oil plus petroleum products imports minus exports) stood at $51.59 billion (Rs 2,21,269 crore) in April-October as against $27.89 billion (Rs 1,12,593 crore) a year ago.
Jet fuel gets cheaper, but no cut in fares on cards
16 Dec 2008;business-standard.com:New Delhi:As a result of crude oil prices falling to a four-year low of around $40 a barrel last fortnight, public sector oil companies today cut aviation turbine fuel (ATF) prices by 11 per cent. The rates will be effective this fortnight. The current rates were set on December 1. This is the seventh consecutive cut in ATF prices since September.
However, after a cut in fuel surcharge announced less than a fortnight ago, Indian carriers are not willing to reduce fares.
“Air India had taken the lead in announcing a cut in fuel surcharge less than a fortnight ago. In that cut we had taken into consideration the decrease in fuel prices for the entire month of December. Having said that, price cut is a subject that we keep monitoring,” said a spokesperson of National Aviation Company of India Ltd (Nacil), which owns national carrier Air India.
After Air India, which announced 14.5 per cent cut in fuel surcharge on December 1, Jet Airways, Kingfisher, SpiceJet and IndiGo had announced similar cuts, bringing down overall ticket prices by 9 per cent. Indian carriers have cut average ticket prices by 23-28 per cent since September.
The spokesperson said 70 per cent of the airline’s costs were in dollars and the weakening of the rupee in the last few months would have taken away around 20 per cent of the benefit of the recent fall in crude oil prices.
Last fortnight, however, the rupee appreciated by 4.5 per cent, which would have had a positive impact in the determination of crude oil prices.
A Kingfisher Airlines spokesperson said they “will evaluate the impact of this announcement and take a view”.
Low-cost carrier SpiceJet CEO Sanjay Aggarwal said there would not be a further price cut at least for now. “We are not going for another price cut until ATF is given a declared goods status, unless there are other competitive reasons,” he said.
The airline industry has been lobbying the government to give ATF the status of a declared good so that the state-level levies on the fuel do not exceed 4 per cent. Currently, sales tax on ATF can be as high as 25 per cent.
“We are evaluating the impact of the cut in jet fuel prices,” said a Kingfisher Airline spokesperson.
Considering that ATF prices account for almost half the cost of an airline, 53 per cent decline in ATF prices since August would have led to around 25 per cent decrease in their total costs.
However, the deficits accumulated before that, when ATF prices increased by around 57 per cent from January to August, would have negated most of these benefits.
ATF prices from January 1 to August 31 rose around 57 per cent. ATF prices from September 1 to December 31 have decreased by 50-54 per cent. The effective cut in the prices of the fuel since January stands at around 28 per cent.
16 Dec 2008;business-standard.com:D Ravi Kanth:Geneva: China today lost its first major trade dispute at the World Trade Organization’s highest appeals court, the Appellate Body (AB), over its additional duty of 25 per cent on imported auto parts.
In a comprehensive ruling, the AB dismissed China’s challenge on several counts, pronouncing that Beijing’s measures violated global trade rules.
The United States, the European Union and Canada had challenged Beijing’s decision to impose 25 per cent charge on imported auto parts, or what are called semi-knocked down (SKD) and completely-knocked down (CKD) sets.
These three members said the duty was inconsistent with Beijing’s tariff scheduled commitments as well as national treatment provisions
While China imposed 10 per cent duty on imported cars, it levied 25 per cent duty on imported auto parts because of their “essential character” close to a complete vehicle. China imposed this duty on manufacturers who imported these parts and subsequently assembled them into complete vehicles.
In the face of the legal challenge, a dispute settlement panel had earlier ruled against the Chinese charge saying it amounted to an internal charge and was not an ordinary Customs duty as argued by Beijing.
The panel said the duty violated national treatment provisions under which WTO members are expected to treat domestic and foreign like products on the same footing.
It said even if the duty was not considered ordinary Customs duty, it was not consistent with the manner in which China had scheduled its tariff commitments at the time of joining the WTO in 2001.
Beijing was dissatisfied with the panel’s ruling and challenged it before the Appellate Body, the highest legal limb of the global trade body to resolve trade disputes.
China asked the AB to rule against the alleged erroneous conclusions reached by the panel on the nature of the duty as well as on other grounds.
Today, the AB largely upheld the panel’s ruling in favour of the US, the EU and Canada. It argued that the Chinese measure amounted to an internal charge and was not an ordinary Customs duty as pointed by the panel.
The highest legal court also disagreed with China that the harmonised system of tariff classification could be used to judge whether a duty was an internal duty or a Customs duty. The AB said the panel did not err, as alleged by China, in its analytical approach to the threshold issue in determining SKD and CKD imports.
Further, the highest legal court said China’s duty was wrong under Article III:2 because the charge was not applicable to like domestic parts. Also, China violated the rules under III:4 since the duty did not provide equal treatment to foreign imported items.
However, China won on one count in its challenge. The AB upheld China’s claim that the panel was wrong in ruling that Beijing’s measure was inconsistent with paragraph 93 of its Accession Working Party Report, which allowed China to apply a tariff of not more than 10 per cent on SKDs and CKDs.
Once the ruling is adopted by the WTO’s dispute settlement body after 30 days, China will be asked to rectify its measures, according to trade analysts.
