Finding Bakra getting more difficult ?

Today’s LiveMint carries following news :

“ Air India Debt could be 40 % higher than estimated 

: Raju “

http://www.livemint.com/Companies/fKqit7b0DhbR3V07a3PDKM/Air-Indias-debt-could-be-40-higher-than-estimated-says-As.html

Air India’s debt could turn out to be 40% higher than previously expected as the airline’s books are combed even as the government has received the first foreign interest in the airline, civil aviation minister Ashok Gajapathi Raju said.

“When our exercise of calculating Air India’s debt began, we found that the sum was hovering around the Rs 50,000 crore mark. But I won’t be surprised if the total debt reaches Rs70,000 crore. Since people are looking at the books carefully, they may find more,” the minister told Network 18 in an interview published on Sunday.

Air India had been estimated to have a total debt of about Rs 48,877 crore at the end of March 2017, of which Rs 17,360 crore is aircraft loans and Rs 31,517 crore is working capital loans.

“According to me, Air India is a debt trap. I said as much in Parliament as well. As far as our account books are concerned, we held an internal meeting where we saw that this accounting year is sorted for us as a part of our own dividends that we get will be used up. The next accounting year needs to be looked into,” he added.

“Another foreign operator has also shown interest in buying 49% stake. So there is certainly a lot of interest” in Air India, the minister said, without disclosing the name.

Civil aviation secretary R.N. Choubey told Mint that a foreign firm has sent “unsolicited” letter of interest for Air India. Foreign firms can own 100% of an Indian airline but foreign airline firms can own only 49% of an Indian airline.

This month, the government had also eased rules allowing foreign airlines to buy a stake of up to 49% in Air India with prior government approval but with the caveat that substantial ownership and effective control of Air India will remain with Indian nationals as is the case with all domestic airlines.

IndiGo, run by InterGlobe Aviation Ltd, and Tata group have shown interest in Air India’s operations.

Turkey’s Celebi Aviation Holding, Bird Group, Menzies Aviation Plc and Livewel Aviation Services Pvt. Ltd have also shown interest in the national carrier’s subsidiaries.

Air India has a fleet of about 140 planes, with a 17% share of traffic on routes linking India to international destinations and about 13% share of the domestic market.

The national carrier, which is part of the world’s biggest airline grouping Star Alliance, also has prime slots at airports across the world along with land banks and buildings, among its assets.

The government hopes to invite expressions of interest from companies after Union Budget 2018, Mint reported on 9 January.

Consulting firm CAPA Centre for Aviation said this month that it expects “significant interest from foreign airlines” as also “4-6 serious bids for AI, subject to bid conditions”.

Last June , Shri Raju had told a TV anchor :

“ There are hardly any bakras around, so to get one is difficult and businessmen are businessmen “

After his today’s revelation about Air India’s debt position , I will not be surprised if Shri Raju fails to find that proverbial “ Bakra “ , who is willing to buy Air India, unless the government goes beyond the tinkering ( eg : splitting Air India into 4 smaller entities ) and accepts suggestions that I made in my following blog / email :

Findinga Bakra ?  Possible ?   [  04  June  2017  ]

https://myblogepage.blogspot.com/2017/06/finding-bakra-possible.html

29  Jan  2018

www.hemenparekh.in / blogs

  

Solar Power : Internal Rate of Return

Indian Express ( 26 Jan ) carries following news :

“ Govt estimates 9 – 11 per cent IRR for renewable projects “

The Ministry of New and Renewable Energy ( MNRE ), has proposed Internal Rate of Return ( IRR ) of major renewable energy projects to be in the range of 9 – 11 %

While computing IRR for “ Utility scale Solar “ projects , following have been assumed :

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ASSUMPTIONS :

·         Zero government incentives

·         No subsidy

·         No market Risks ( Payment delays / curtailment )

·         Capacity Utilization = 20 %

·         Capital Cost ( Rs Cr / MW ) =  4.10

·         Average Tariff ( Rs / kwh )  =  3.0

·         Weighted Average Cost of Capital  =  10.5 %

·         Corporate Income Tax rate  =  34.61  %

·         For details, read : http://mnre.gov.in/file-manager/UserFiles/Draft-Report-Study-on-ERR-for-RETs.pdf

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MY OWN INPUTS :

·         Target for Solar                 =    100  GW  by 2022

·         Achieved till Dec 2017        =      15  GW

·         Remaining by Dec 2022      =      85  GW  ( app. 1.5 GW per month for each of next 60 months )

·         Capital cost / GW               =      Rs  4,100 Cr  (  @ Rs 4.1 cr / MW assumed in MNRE study )

·         Capital needed per month  =  Rs  6.150 Cr   ( for 1.5 GW per month )

·         Current maximum installation of solar PV ground mount projects done in a year is 3700 MW

QUESTIONS :

Given the following “ Negative Factors “ , are Private Indian businesses likely to come forward with investment of Rs 6,150 Cr , every month , month after month , for next 60 months ?

·         Solar tariff have already hit Rs 2.4 / kwh and continue to drop year after year @ 15 %

·         Will any bank come forward to lend huge amounts to Solar projects whose IRR is only 10 % - and might further go down as Solar Tariff drop ?

·         How will IRR work out when DISCOMS back out of legally binding PPA  ?

·         What happens if proposed “ Safe-Guard Duty “ ( of 70 % ) on imported Chinese PV panels , push up the Capital Costs ? or , when projects are constrained to buy locally manufactured panels at much higher prices ?

·         What would it do to demand situation if Roof Top Solar become a cheaper alternative to the consumers ( as compared to  Utility Solar Projects ) , since there is no “ Transmission Costs “ involved and there is possibility to sell the surplus power to DISCOM under “ Reverse Metering “ ?

Despite these “ Negative Factors “ , is there some way , by which Private Sector can be motivated to come forward to invest Rs 6,100 cr / month , month after month , for next 60 months ?

I believe , there is  !

If the IRR , instead of hovering around 10 % , can be raised to 50 % , then we can expect Private Sector to put up 1.5 GW projects, EVERY WEEK , instead of every month !

Now , calculating IRR is a bit lengthy / trial-and-error process , employing formulas comprising “ variables “ such as :

·         Weighted Average Cost of Capital, adjusted with the long-period consumer price index for the past 20 years to arrive at the real discount rate. (  Taken at 10.5 % by MNRE study )

·         Corporate Income  Tax rate ( taken at 34.61 % by MNRE study )

·         Initial Amount of Capital

·         Potential Opportunity Costs

·         Initial Cash Flow

·         Subsequent Period-wise Cash Flows ( Future stream of benefits )

QUESTIONS :

How would the IRR look if ,

·         Weighted Ave Cost of Capital was  “ 0 % ( Zero per cent ) “ instead of 10.5 %  ?

·         Corporate Income Tax rate was “ 0 % ( Zero per cent ) “ instead of 34.61 %  ?

In such a case , could IRR become 50 %  ?  (  MNRE study does not provide enough data for figuring out )

But if IRR  does really turn out to be somewhere near 50 % , will Private Sector rush in to set up 1.5 GW of Solar projects EVERY WEEK ?

And , would they be bothered even if Solar Tariff drops to  ONE RUPEE  per kwh ?

This is NOT a fantasy !

Masdar and EDF Energies consortium recently placed the lowest-ever bids for a solar PV project. The consortium placed a bid of 1.78¢ / Kwh for a 300 megawatt project in Saudi Arabia. ( ie : approx. Rs 1.17 / kwh )

https://www.thenational.ae/business/energy/world-s-cheapest-prices-submitted-for-saudi-arabia-s-first-solar-project-1.663842

One of the reasons , is :

The lending rate in Saudi Arabia has remained constant at 2% since 2009 !

Chile recently awarded 2.2 GW in renewables tenders at an average LCOE of $ 32.5/MWh (  approx. Rs 2.11 / kwh  )

HOW CAN WE GET “ RISK-FREE “ CAPITAL AT “ 0 % “ INTEREST RATE ?

Besides showing “ how “ , in my following blog / email , I also suggested that the Govt approved Solar Power Project SPVs , be exempted from payment of Corporate Income Tax for 10 years :

Solar Power at Rs 1 per Kwh ?  [  29  Jan  2017  ]

https://myblogepage.blogspot.com/2017/01/solar-power-at-rs-1-per-kwh.html

 

I hope , Shri Dipesh Pherwani, Scientist-B, Ministry of New and Renewable Energy (Email: dipesh.mnre@gov.in) , gets to read my suggestion

 

28  Jan  2018

www.hemenparekh.in / blogs

 

Whose Interest ?

Government officers are often faced with following difficult questions, while taking decisions :

------------------------------------------------------

While taking this decision, whose interest am I protecting ?

 

·         Interest of   “ 1 million “  persons or of  “ 1,000 million “  persons ?

·         The “ Vested interest of a small minority “ and for a “ short duration “ , as against the “ Social interest of a vast majority “ which is of a “ long term duration “ ?  

            [  Ignore the numbers - figures will vary from case to case  ]

-----------------------------------------------------

Following are some recent examples :

·         French President Macron announced at WEF – Davos , two days back :

“  France will shut down ALL of its coal-based Power plants, by year 2021 “

President Macron said he wanted to “make France a model in the fight against climate change,” as one of five pillars in his plans to reform the economy.

I have a feeling that he will be followed by similar announcements by leaders of other EU countries , for the following reasons :

Across the European Union, the economic tide is already turning against coal power : more than half of the bloc’s 619 coal-powered plants are losing money, according to a report. A combination of rapidly falling prices for renewables and air pollution laws are pushing them out of business.

·         US President, Trump levied a 30 % import duty on Solar Panels

.

·         Closer at home in India :

o    The Directorate General of Safeguards Duty (DGS), in its preliminary report investigating the dumping of solar cells, (whether or not assembled in modules or panels), has suggested a 70 per cent safeguards duty on imports from China. The DGS has identified ‘serious injury’ to the domestic industry caused due to increasing imports and declining prices of Chinese solar panels.

o    NTPC , whose coal-based power plants are the chief culprit in causing air pollution ( and most of which are operating well below the optimum PLF – Plant Load Factor – and producing power at Rs 3.19 / kwh ), has come out with a tender to buy-out another 12-18 coal-based power plants , which are “ stressed assets “ !

o    A Parliamentary Committee wants to stop sale of Air India and wants it to continue making losses ( approx. Rs 6000 cr / year ) for another 5 years !

How come neither our legislators , nor our administrators , are asking :

·         What is the trade-off between ,

     #   Imported Solar Panels / Cells, helping India to bring down Solar Power tariff

          to ( say ) Re 1 / kwh by 2022 and turning India into a “ Low Cost Economy “

          Vs:

         Protecting the jobs of a few thousand persons employed by local

         manufacturers of Solar Cells – Modules – Panels ?

    #   Saving the NPA of a few banks which have lent money to those stalled / idling

         Coal-based power plants of Private Sector,

         Vs :

         Continuing to supply dirty power to homes / industries for Rs 3.19 / kwh ?

It seems to me that when it comes to “ Globalization  vs  Protectionism “, we have different standards !

For thousands of years, Indian Ethos has been :

·         A person must sacrifice for saving his family

·         A family must sacrifice for saving the community

·         A community must sacrifice for saving the country

It is high time we introduce this VALUE SYSTEM in our school syllabus

27  Jan  2018

www.hemenparekh.in / blogs

Self Employed Indians inherit the Earth ?

If you too are one of those persons in search for a solution to India’s “ Jobless Growth “ , you may want to read :

Indian technicians dial into careers fixing China phones

 

http://www.thehindubusinessline.com/info-tech/indian-technicians-dial-into-careers-fixing-china-phones/article10051664.ece

Made in China’ smartphones may have taken the world by storm, but it is ‘trained in India’ technicians who are ensuring that users get more bang for their buck — by repairing the most expensive of mobiles across the world.

With greater demand for mobile phone technicians, institutes in India are not only training students to work with mobile manufacturers and at service centres but also helping them set up repair shops abroad.

Unnikrishnan Kinanoor, Executive Director at Britco and Bridco, one of India’s oldest mobile repair training institutes, which was set up in 1998, says : “With mobile sales growing across the globe, quality manpower is required to service the sophisticated devices. India’s biggest strength is manpower and, with the right training, they can work anywhere in the world.”

The Kerala-headquartered institute now has nine centres in India, besides branches in Australia, Bahrain, Saudi Arabia and Somaliland. Its students work with leading OEMs such as Apple, Samsung, Nokia, Micromax, Flextronics, TVS Electronics and Lava.

In 2017, 350 Britco students went abroad either through placement or on their own to start businesses. In 2016, that number was over 300.

 “Most students prefer the Gulf countries where even fresher earn over ₹40,000 a month,” Kinanoor adds. Professionals with two years’ experience earn up to ₹1.25 lakh a month.

“In India, salaries do not rise after technicians hit a ceiling of ₹25,000. That is why going overseas is an option for many,” says Shuaib Sogay, founder of Mumbai-based Prizm Institute. Its alumni run mobile repair businesses in the US, Canada, Germany and the Gulf countries.

Many opt to stay in India too as smartphone sales are rising rapidly here.

Over 3 crore smartphones are being sold in the country every quarter, next only to China and the US.

“This requires an equally massive workforce of technicians. There aren’t enough skilled hands to repair phones in India. That’s why even a small fault takes many days to be resolved,” says Sogay.

The two institutes also help students set up businesses on completion of the course.

It requires an investment of about ₹1 lakh, excluding infrastructure.

“And even a fresh technician can easily expect to earn over ₹1,000 a day. Our intention is not to create technicians but entrepreneurs,” says Kinanoor.

The fee for the courses ranges from ₹9,000 to ₹1 lakh depending on the duration and course level. The top-end courses at Britco include language training to help students overcome communication difficulties overseas.

Both Prizm and Britco are investing in R&D.

Britco’s R&D team travels to China regularly to buy new repairing equipment and tools, as does Arshad Shaikh, who runs a business from two shops in Mumbai’s City Center Mall, the hub of mobile repairs in the city. “I travel to China regularly to get low-cost spares. I also update myself with latest technology on these trips,” he says.

 With shops in the heart of the city, he earns over ₹1.5 lakh a month. “I am planning to start another shop when my brother completes his training,” he adds.

That brings us to the opportunity for “ Self Employment “ for India’s 12 million jobless getting added to our workforce, each year

In the form of “ Recycling / Repairing of  E – Waste “

Following figures prove my point :

Source :  https://www.thebalance.com/e-waste-recycling-facts-and-figures-2878189

·         In 2014, approximately 41.8 million tons of e-waste was generated worldwide.

·         The amount of worldwide e-waste generation is expected to be 49.8 million tons in 2018

·         Only 6.5 million tons of total global e-waste generation in 2014 was treated by national electronic take-back systems

• Currently, only 15-20 per cent of all e-waste is recycled.

• According to a recent report by EPA, every day, we are to get rid of over 416,000 mobile devices and 142,000 computers either by recycling or disposing of them in landfills and incinerators.

• Another EPA report reveals that by recycling one million cell phones, we can recover more than 20,000 lbs of copper, 20 lbs of palladium, 550 lbs of silver, and 50 lbs of gold.

• Cell phones contain very high amount of precious metals such as silver and gold. Americans throw away approximately $60 million worth of silver and gold per year.

• Each year, globally, around 1 billion cell phones and 300 million computers are put into production.

• The amount of global e-waste is expected to grow by 8 per cent per year.

• Roughly 80 percent of e-waste generated in the U.S. is exported to Asia, a trade flow that is a source of considerable controversy.

=================================

QUESTION :

Can , at least 5 million Indian youth get self employed , repairing / recycling ”  E Waste “ generated globally ?

Absolutely , if NDA government comes up with a scheme to encourage Private Industries / Individuals to come forward and set up 5,000 training institutes of the type set up by Britco and Bridco ( each training 1,000 students per year )

Is that possible  ?  Will private individuals come forward to set up such “ Repair Training Institutes “ ?

Yes , if Government implements my following suggestion :

SkillCapital of the World ?  [  06  June  2016  ]

https://myblogepage.blogspot.com/2016/06/skill-capital-of-world.html

Unfortunately , I do not see Shri Arun Jaitleyji announcing this in his budget speech on coming Tuesday ( 01 Feb 2018 )

What a missed opportunity to win 400 seats in 2019 Lok Sabha elections – without spending from govt coffers or raising taxes !

=================================

27  Jan  2018

www.hemenparekh.in / blogs