The NDA government is likely to provide subsidy to states that take up the task of having separate electric feeder for domestic use and a limited agricultural supply of nearly eight hours a day. The model is currently at work in Gujarat. The segregation of the agriculture feeder line has been on the agenda of the Planning Commission as well, but the state governments have shown reluctance to adopt the policy fearing political backlash.“We will offer a subsidy to the state governments and convince them that segregation will lead to better utilisation of available resources, leading to lesser power cuts,” said a government official in the know of things.“The amount of subsidy is being worked out. If we look at the Gujarat model, the whole state spent just Rs 1,300 crore to implement the project. The subsidy for the whole country would not be very much if things are implemented with sincerity,” added the official.After setting up a separate agricultural electricity feeder, the Gujarat government has brought down transmission and distribution losses from 35 per cent to 15-19 per cent in five years.Studies conducted by the Ministry of Power and other state governments suggest that low cost or free electricity to agriculture sector leads to wastage and theft of power. If the government creates separate feeders for both sectors, it will help agri sector get constant and high voltage power during in the day, when agriculture activity is at its peak. The Bihar government had also begun a pilot project under the name 'Rainbow Revolution' on the same lines.The ministry of power is preparing a roadmap for improving the electricity supply in the country, and this model has been discussed in all the pre-budget meetings held in the ministry, so far.Union power minister, Piyush Goel had visited Gujarat after taking over the responsibility of the ministry to study the model. Gujarat was one of the first states to implement this model of electricity supply and it has improved the power situation in the state. Gujarat boasts of providing 24 hour electricity to all cities and villages.In an approach paper to the 12th plan, the Planning Commission had also proposed the segregation of agriculture feeder line saying “ The separation of agricultural feeders in the country will enable villages to get 24x7 three-phased power for domestic uses, schools, hospitals and village industries."
Read More
Several years after New Delhi, the country’s political capital, witnessed a transformation with the implementation of the Delhi Metro, the financial capital of Mumbai is set to experience a similar phenomenon with the imminent commissioning of the Versova Andheri-Ghatkopar (VAG) corridor of the Mumbai Metro. With equity participation from Reliance Infra and Veolia (a French transportation major), this PPP initiative has all the hallmarks of a game-changer for the city’s transportation and realty landscape.Many facts about the VAG have already been well documented: A project investment of $720 million, a fleet of 16 rakes with 4 fully air-conditioned coaches with an individual capacity of 375 passengers, travel time reduced to 21 minutes from the current 90 minutes between Versova and Ghatkopar - and of course, improved East-West connectivity. However, the impact on the Mumbai realty market is likely to be far more pronounced.Transportation infrastructure economics have historically proven to have a positive impact on real estate values in a city like Mumbai – residential and commercial properties located close to transportation infrastructure tend to command a premium. Independent analyses of pricing reveal that proximity to a Metro station can single-handedly account for a 22 per cent variation in land values, the other factors being location, distance of the land from the central point and income groups. On the back of the execution of a string of surface transport infrastructure projects – viz the Jogeshwari-Vikhroli Link Road (JVLR), the Santacruz Chembur Link Road (SCLR) and the Wadala-Chembur Monorail - the VAG corridor will further stoke the already buoyant Mumbai realty market. Each of these transportation infrastructure initiatives have had a tonic effect on the adjoining realty micro markets – for example the expected implementation of the Monorail had pumped up property prices in Chembur and Wadala by more than 100% in a short span of 4 to 5 years. This also applies to the SCLR, with which the Chembur micro-market again witnessed a perceptible price rise due.The areas which will benefit from Metro connectivity have already seen price rise of 400 per cent over the past eight years, and this trend is set to continue with this imminent launch. A more detailed impact analysis follows below:Near Term ImpactDevelopers’ interest in projects near the Metro has been increasing since the start of construction. With the commencement of the project, the surrounding region will definitely experience a certain boom in terms of new offerings and price hikes. Rates on both the commercial and residential market will increase, as the properties of northern SBD, BKC and SBD central are the most preferred locations for investors.Medium Term ImpactIntra and inter-connectivity in SBD North and the Eastern suburbs will increase tremendously, given the capacity of 7 lakh passengers per day added by the Metro. Concurrently, East-West connectivity will benefit the maximum by this project, which will reduce the burden on JVLR and SCLR (the current East-West corridors). Travelling to the Eastern suburbs and Navi Mumbai from the Western suburbs and SBD North and back will become faster and more convenient. Among the series of mega-projects such as the Eastern Freeway, SCLR and Monorail in the past one year, the Metro is the biggest so far. The combined effect reflect positively on Mumbai’s real estate market - the residential and retail markets in Andheri, Jogeshwari and Ghatkopar will witness tremendous growth, especially those near the Metro stations.Long Term ImpactLong term value capture would be possible through increase in FSI. If the proposal of granting FSI of 4 to areas near the Metro is approved, it will have a far-reaching impact and potentially transform the entire landscape of areas surrounding the Metro.Micro Market Wise ImpactCBDAlready losing out to BKC and SBD Central, SBD North will now also pose a strong contender as a business destination alternative to CBD. Absorption could reduce due to the trend of shifting away from CBD, which will lead to a correction in prices.SBD CentralSBD North might not be able to compete with BKC, but it will pose a challenge to SBD Central. Residential and commercial spaces in SBD North may start becoming preferred over SBD Central, especially when favourable prices are found in SBD North.SBD BKCBKC will remain largely unaffected - even factoring in the effect of the Metro on SBD North, the advantages that BKC already has will keep it firmly in the number one position. Absorption and prices will remain steady.SBD NorthThe maximum positive effect will be seen in SBD North, as the Metro runs across its entire width, covering practically all the important destinations. Absorption and supply are set to increase rapidly along with capital and rental values. The residential market in certain key areas will see a boost in activity, especially in Andheri West.Western SuburbsThe Metro will also have a positive impact on the Western suburbs due to the faster connectivity to the Eastern suburbs. Absorption rates and supply will increase marginally. Residential markets will also take off in areas closer to the Metro.Eastern SuburbsBesides SBD North, this micro-market is going to see the maximum impact from the Metro. Rental and capital values are set to increase as absorption rates move up. The residential market in areas like Ghatkopar will derive the maximum benefit.Thane-Navi MumbaiIf at all, Thane and Navi Mumbai will see only a marginal positive impact, as commuting to the Western suburbs and SBD North and back becomes faster. Otherwise, these markets are will remain largely unaffected.The commissioning of the VAG corridor of the Metro is like to transform the dynamics of the Mumbai transportation, as well as its realty market. In conjunction with the SCLR and the Monorail, the Metro is certainly poised to become a major game-changer for realty investments in Mumbai.
Read More
Oil prices dipped in Asia on Thursday (05 June) after Russian President Vladimir Putin reached out a hand to crisis-hit Ukraine, raising hopes of an easing in the worst East-West standoff since the Cold War.US benchmark, West Texas Intermediate for delivery in July, eased 20 cents to $102.44 a barrel while Brent North Sea crude for July was down 10 cents at $108.30."Benchmark prices fell due to the easing of tensions between Ukraine and Russia," said Sanjeev Gupta, head of the Asia-Pacific oil and gas practice at consultancy firm EY.Speaking to French media on Wednesday (04 June), Putin said he was ready to meet Ukraine's newly elected president Petro Poroshenko as well as Western European leaders at the sidelines of World War II ceremonies in Normandy, France.Group of Seven leaders, meeting without Putin as Russia was ejected from the G8 grouping in March, however urged Moscow to stop destablising Ukraine or face further sanctions.The West has accused Russia of fomenting unrest in neighbouring Ukraine since the ousting of pro-Kremlin president Viktor Yanukovych in February. Moscow denies the allegation.Investors fear a full-blown conflict in the ex-Soviet state, a conduit for a quarter of European gas imports from Russia, will disrupt supplies and send energy prices soaring.Analysts meanwhile said oil prices were also under pressure as dealers digested a mixed US supply report.The US Department of Energy on Wednesday said that American commercial crude stocks fell 3.4 million barrels last week, far more than expectations for a fall of 100,000 barrels.But gasoline stocks rose 200,000 barrels and distillate stocks jumped two million barrels; the latter was far above the 700,000 rise projected by analysts.The surprisingly higher stocks of gasoline and other refined products suggested "weak demand during the Memorial Day weekend, which was the unofficial kickoff of the annual US summer driving season," Singapore's United Overseas Bank said in a note to investors. (Agencies)
Read More
JP Morgan downgrades Coal India Ltd to "underweight" from "neutral", while cutting NDMC Ltd to "neutral" from "overweight".The investment bank says Coal India's downgrade was driven by its assessment of potential coal production and prices.On NMDC, JP Morgan says it expected just "broadly stable" domestic iron ore prices, while noting "weak" global iron ore prices as another factor.(Reuters)
Read More
Seven years ago, when the country’s largest power producer, NTPC, lost out the bid for Tilaya UMPP to Reliance Infrastructure owned R-Power, stock analysts as well as sector’s experts had castigated the management for not being aggressive enough. In fact, the public sector enterprise had already lost two previous bids for Sasan and Krishnapattam UMPPs (ultra mega power projects) - also awarded to R Power- and had not participated in the bidding for the Mundra UMPP which was awarded to Tata Power. But today, the Tilaya UMPP is yet to come on ground. Of the other three UMPPs, only Tata Power’s Mundra UMPP has begun commercial production of power and the company has incurred huge losses on the project. The NTPC management often quotes this example as the reason behind a good balance sheet of their company. Today, the company has received 30 expressions of interest from private sector companies to buy out their distressed projects. The euphoria over the power sector is over and only players with long-term strategies are in a position to continue in the business. While big business groups like R-Power and Tata Power are struggling to keep afloat, smaller players like Lanco Infra, GVK Infra, and JP Power ventures have damnable debt to equity ratio on their balance sheets in the range of 4 to 23. Sooner or later they will have to sell their power assets or the debt will impact their other businesses also. Experts say that power is a business of long gestation period and only companies with a horizon of 10-15 years can survive. Today, NTPC has a huge cash pile of Rs 17,000 crore and a debt to equity ratio of 0.9 only. NTPC has an installed capacity of 42,454 MW comprising of 22 Coal based and 8 Gas based projects. The company has massive ongoing capacity addition plans with around 20,000MW projects under construction. The company might add as much as 10,000 MW in the coming years by acquiring distressed thermal power assets according to market experts. NTPC’s strong growth is a result of focusing on the fundamentals of the power business. The company never went for Chinese power equipment, which were cheaper as compared to equipment provided by BHEL. But the quality of expensive equipment has helped NTPC maintain highest average Plant Load Factor, or capacity utilisation, in the country. NTPC’s coal plant PLF improved about 1.8 per cent in FY14. The PLFs of all thermal power generators fell by an average of 4 per cent in the same period. This reflects in the company’s financials as the company’s EBITDA from generation business has grown to Rs 17,348.24 crore from Rs 15676.21 crore registering a growth of 10.67 per cent year-on- year for FY14.
Read More
A reverse mortgage is a special type of loan against a home that allows the borrower to convert a portion of the equity in the property into cash. The equity built up over many years of home loan payments can be paid directly to the borrower. However, unlike a traditional home equity loan no repayment is required until the borrower(s) cease to use the home as their principal residence.With a traditional second mortgage, or a home equity line of credit, one must show sufficient income versus debt ratio to qualify for such a loan, and needs to make monthly payments towards the mortgage. Reverse mortgage differs in that it pays the borrower, and is available regardless of current income or assets. The amount that can be borrowed depends on the borrower's age, the current interest rate, other loan fees, and the appraised value of the property. One does not have to make payments, because the loan is not due for paying off as long as the house is one's principal residence. Like all homeowners, the borrower is still required to pay applicable real estate taxes and other conventional payments like utilities.One of the myths about a reverse mortgage is that one loses one's home at the end of the mortgage term. This is not always the case. The owner can retain the home if one pays back the funds received from the reverse mortgage lender. Payouts on a reverse mortgage can be made to the borrower in a single lump sum on approval of the reverse mortgage, in monthly payouts or in the form of a line of credit that the borrower you can draw from whenever he or she decides to. There are benefits to both approaches depending on one's immediate cash requirements and tax situation.There are three reasons why reverse mortgage has not proved to be popular in India. First, Indians look at owned property as a primary asset, ideally to be handed down generations and not encashed in any form unless extreme financial issues prevail. Secondly, Indian culture has the care and support of senior citizens hard wired into it - elderly people who own properties in this country do not, as a rule, lack the financial wherewithal to support themselves in their Golden years. Thirdly, the product itself is not as well understood in India as traditional home loans are. In any case, it does seem that unless the classic reverse mortgage is tweaked in a manner to make it more palatable to Indian sensibilities and values, it is not likely to become a big hit.Reverse mortgage in the Indian context makes sense for elderly persons owning residential property who, for whatever reason, have no other dependable financial recourse. Also, there are instances of severe rifts within the family which can give an elderly person to choose to encash rather than bequeath the property. Finally, reverse mortgage can be used as a temporary fallback option. In other words, reverse mortgage can be availed of for a certain amount which can then be paid back in a predictable period so that the ownership of the property is returned to the owner.The author is chairman and country head of JLL India
Read More
Swathes of India's most populous state plunged into darkness for 12 hours a day last week as temperatures in Delhi hit their highest in 16 years, with the disruptions underlining the tough challenge a new government faces in keeping the lights on.Two years after one of the world's biggest blackouts deprived at least 300 million people of power, India still suffers from frequent cuts that undermine efforts to revive the third-largest economy in Asia.Prime Minister Narendra Modi's Bharatiya Janata Party (BJP) stormed to office last month on promises to boost the economy and improve basic services for the millions of Indians who still lack running water and electricity.One of his first steps in tackling the energy crunch has been to unite the portfolios of power, coal and renewable energy under a single minister, Piyush Goyal.But the power sector also shows the limits to what the central government can do, with key decisions devolved to the country's 29 states.While Modi is expected to fast-track new projects to boost output and press states to stop politicians from giving away electricity to voters, the task of translating extra capacity into reliable supply falls on state governments."We have a situation where there is enough idle power generation capacity in the country but states are witnessing power cuts," said Umesh Agrawal, a power expert at PwC."The problem today is not a lack of supply but lack of willingness from state utilities to procure power."The BJP has blamed last week's outages in Uttar Pradesh on the party that rules the state, saying it is punishing constituents who voted for other parties in the general election. The local government rejects the charge and says it is not getting enough power from the centre to meet demand.Temperatures in north India have surged past 40 degrees Celsius, while a dust storm in the capital damaged power lines last Friday, further straining energy infrastructure.Reform PushIndia's power generation has grown - the peak deficit is down to 5.4 per cent from 16.6 per cent in 2008, government data shows - but getting the supply to end consumers is far trickier.Regional politicians tell distributors to prioritise supply to favoured constituents, while popular pressure for cheap or free power has kept theft high and prices artificially low, straining utilities' finances and curbing new investment.Those factors will hamper any reform push by Modi, who campaigned on his record as chief minister of Gujarat, which enjoys a surplus of power.Reforms in Gujarat a decade ago cut theft, restructured distributors and split tariffs between different users. Goyal has vowed to tour the state to learn about its reforms.But the power to make decisions about tariffs, subsidies and collection rests with states, limiting New Delhi's influence.Modi must also tackle shortages of coal and gas that have left new plants operating below capacity - India's second-largest gas-powered plant, Bawana, is producing a fifth of its capacity, because it cannot get hold of gas."Our entire power projects are stalled," said Madhu Terdal, group chief financial officer of GMR Group, which has delayed making an investment of $3 billion in its plants because of the shortages and because its costs exceed the price it can get for selling electricity."You either subsidise the distributors or you subsidise the generators, but you have to do something," Terdal said.(Reuters)
Read More
The output of eight core industries increased 4.2 per cent in April, boosted by higher electricity, fertiliser and cement production. The coal, crude oil, natural gas, refinery products, fertilisers, steel, cement and electricity sectors had expanded 3.7 per cent in the same month last year. Growth in these industries decelerated to 2.7 per cent in 2013-14. The eight industries have a combined weight of about 38 per cent in the Index of Industrial Production. Electricity production increased 11.2 per cent in April, fertilisers 11.1 per cent, cement 6.7 per cent and coal 3.3 per cent, all at a faster pace than a year earlier. Steel production increased 3.1 per cent compared with 10.1 per cent in the same month last year. The crude oil, natural gas and petroleum refinery product sectors contracted 0.1 per cent, 7.7 per cent and 2.2 per cent, respectively, in April. (Agencies)
Read More
