The government has thrown a lifeline to India’s struggling aviation industry. And two carriers, Kingfisher and Air India, are expected to be the biggest beneficiaries. On Tuesday a group of ministers has decided to allow airlines to import jet fuel directly. The move could help them cut fuel costs by up to 20%. Fuel usually accounts for about half of a carrier’s operating costs. Kingfisher Airlines, which is both loss-making and ridden with debt, has long been pleading for direct imports.
And in another key decision the same day, the group of ministers approved Air India’s debt recast plan. That will entail converting Rs11,000 crore worth of short-term debt into long-term loans. And another Rs7,500 crore worth of debt will be converted into government-guaranteed bonds. Of course, the Union cabinet still has to approve the decisions of fuel imports and Air India, but both are expected to pass through with little trouble.
File photo of Kingfisher
Moving to the economy, government figures released on Tuesday confirm growth is expected to slow down to its lowest levels in three years. The latest advance estimate says India’s economy will grow at just 6.9% this fiscal. That would mean India will have grown at just six-and-a-half percent between October and March. Government officials had been predicting growth of 7-7.5%.
And the gloom surrounding the economy only continued. Numbers released on Thursday showed India’s industrial output had drastically slowed down in December. The index of industrial production increased just 1.8% during the month. Of course, the new figure completely contradicts the HSBC Purchasing Managers’ Index, which showed a strong gain in production in December. But finance minister Pranab Mukherjee admitted the numbers were disappointing and said he hoped for a pick-up in a couple of months.
Moving to earnings, the country’s biggest telecom firm, Bharti Airtel, has disappointed investors by reporting a fall in profits for an eighth straight quarter. Consolidated net profit tumbled 22% to Rs1,011 crore. That was on a 17% rise in revenues to Rs18,477 crore. Airtel said some of the decline was caused by higher tax provisioning after some tax holidays came to an end. Meanwhile the company’s key measure of profitability—its average revenue per user- has also fallen. In India, Bharti Airtel reported a 6% drop to Rs187. And in Africa it fell 3% to $7.1.
Meanwhile, another giant firm has done even worse. India’s largest steelmaker, Tata Steel, posted losses for the first time in more than two years. The company reported a loss of Rs687 crore in the third quarter, compared to a profit of Rs949 crore in the same period the previous year. That was despite a 15% rise in net sales to Rs32,964 crore. The biggest contributor Tata Steel’s losses was a Rs742 crore write-down at its European unit Corus. But steel and other metal companies are already suffering from a high input costs and low demand from Europe. Steel firms have also had to write down their inventories because market prices have fallen.
And finally, there’s a shake-up in India’s young e-commerce industry, with Flipkart Online Services acquiring online electronics retailer Letsbuy.com. The deal is estimated to be worth $25-30 million.