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Delhi-NCR stuck with highest unsold housing inventory; Mumbai next: ASSOCHAM
May 06,2016

The woes of the real estate sector are far from over or have rather worsened with inventory of residential premises and commercial estates rising between 18-40 per cent in different cities with the maximum unsold stock lying in the Delhi NCR over the last one year, creating a big drag on several other sectors like financial services and steel, an ASSOCHAM study has pointed out.

In spite of a fall in prices and interest rates, the demand for residential market has witnessed a steep decline by 25-30% in the whereas the demand for commercial space dropped by 35-40% in the NCR region over the last year, an ASSOCHAM study has pointed out.

Mumbai which had been witnessing an increased activity around Navi Mumbai, Thane and other suburbs, is carrying the second largest inventory, followed by Bengaluru and Chennai.

While Mumbai had unsold sold of 27.5 per cent, for Bengaluru it was 25%, Chennai (22.5%), Ahemdabad (20%), Pune(19.5) and Hyderabad (18%) , the ASSOCHAM paper noted.

It said the NCR residential market has an estimated 2,50,000 units of unsold inventory which is approximately 35% of the units under construction due to delay in regulatory clearances and litigations. n++It is a difficult period both for the developers and the consumers who have booked flats. The regulators, developers, banks and consumers should form joint groups to work out the solutions, ASSOCHAM Secretary General Mr D S Rawat said.

n++The ticket price (of) three-bedroom, two-BHK and single room flats has seen correction by 35 per cent in Noida, 30 per cent in Gurgaon and 25 per cent in some key areas of Delhi but still, the demand stays subduedn++, the paper said.

This year, the unsold inventory in residential real estate was the highest in Delhi-NCR at 2,50,000 units, followed by the Mumbai metropolitan region at 98,000. Bangalore came next with 66,000 units, Chennai with 60,000 units and Pune followed with 55,000 units, adds the ASSOCHAM recent findings.

The subdued construction activity has had a huge negative impact on the labour market since there are about 10 to 12 million workers engaged in the real estate sector. The slump in sales and launches clearly indicates that the residential market is facing a strong price resistance

As per the report, many stakeholders include developers, financial institutions and other supply-side stakeholders believe that the current market scenario is worse compared to last year. Delayed reforms seem to have affected sentiment. Residential launches, sales, and price appreciation are at a much lower level than the last year.

The total number of new project launches in the National Capital Region (NCR) had come down by 30-35 per cent in comparison to the last year. The finances are getting choked and are being forced to cut prices to some extent, said ASSOCHAM Real Estate report. The unsold inventory is highest in Noida, with over 1,20,000 lakh units while the remaining unsold inventory is in Delhi, Ghaziabad and Faridabad.

The further revealed that the NCR residential market is stuck with an estimated inventory of 2,50,000 units while another 1,75,000 dwelling units under construction are likely to be delayed for handover, adds the paper.

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CBDT orders that the income arising from transfer of unlisted shares, irrespective of period of holding, would be taxable under the head Capital Gain
May 06,2016

Central Board of Direct Taxes (CBDT) vide its Order dated 2nd May, 2016 has given direction to its field formations, with a view to avoid disputes/Litigation and to maintain uniform approach that the income arising from transfer of unlisted shares, irrespective of period of holding, would be taxable under the head Capital Gain except in certain circumstances where the Assessing Officer would examine the issue and take appropriate view.

This order is in continuation to the earlier circular of CBDT (circular No.6/2016 dated 29 February 2016), wherein position of Income Tax Department regarding transfer of listed shares and securities was spelt out.

With these initiatives, it is expected that there would be much needed certainty and predictability regarding taxability of income arising from transfer of shares. Consequently, due to uniformity in approach, tax disputes and litigation on this issue would reduce substantially.

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India is the largest producer of coir in the world
May 06,2016

India is the largest producer of coir in the world with a production of 5,42,000 MT which comes to around 55% of world production of coir. India is followed by Sri Lanka and Vietnam in terms of production of coir.

Government of India is implementing various Schemes for promotion of coir in the country and to enhance the production and export of coir and coir products. The Schemes are Coir Udhyami Yojana, Science & Technology and Coir Vikas Yojana comprising of components like Skill Upgradation, Quality Improvement Scheme and Mahila Coir Yojana, Export Market Promotion & Domestic Market Promotion. Government is also implementing the Scheme of Funds for Regeneration of Traditional Industries(SFURTI) for development of Coir Clusters. Under the ASPIRE Scheme of the Ministry of Micro, Small and Medium Enterprises (MSME), Coir Board is in the process of establishing Livelihood Incubation Centres in various parts of the country, which will provide training and handholding support to new entrepreneurs of coir sector.

The thrust of Government has been to promote production of coir in the non-traditional States for which Coir Board has recently opened offices in Sindhudurg in Maharashtra, Kavaratti in Lakshadweep and Port Blair in Andaman & Nicobar Islands. In addition, Government through Coir Board has been focusing on production of value added products to cater to domestic as well as foreign markets.

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Steps taken by CIL to improve Coal Production from Underground Mines
May 06,2016

Coal India (CIL) has envisaged following steps to improve coal production from underground mines include:

n++ Planning new underground mines adopting mass production systems like continuous miner technology and longwall technology wherever feasible.

n++ Entering into risk / gain sharing arrangements with the equipment suppliers for guaranteed levels of production and maintenance of equipment

n++ Undertaking thorough geo-mining investigations before the formulation of the projects

n++ Training of manpower.

n++ Replacing manual loading with loading machines like Side Discharge Loaders (SDLs), Load Haul Dumpers (LHDs) in conjunction with belt conveyers wherever feasible

n++ Providing man riding systems to reduce travel time of miners

n++ Introducing multi skilled job concepts etc.

n++ Create adequate infrastructural facilities for ventilation, bunkerage, coal evacuation, out-bye transportation, mechanized tunnelling, shaft sinking, roof supporting.

n++ Delineate new blocks amenable for longwall technology with super block concept.

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Jewar Airport Under Consideration
May 06,2016

Government of India (GoI), Ministry of Civil Aviation has received a proposal from Government of Uttar Pradesh (GoUP) in April, 2016 for grant of Site Clearance for proposed Noida International Airport near Jewar, Dist. Gautam Budh Nagar, Uttar Pradesh. GoI has notified a Greenfield Airport Policy, 2008 to provide guidelines for setting up of new airports in the country. As per the Greenfield Airport Policy, the proposal has been sent to Airports Authority of India (AAI), Directorate General of Civil Aviation (DGCA) and Ministry of Defence (MoD) for their comments/observations on the site identified for setting up of International Airport near Jewar, Uttar Pradesh. The proposals are considered by Steering Committee set up in Greenfield Airport Policy in consultation with AAI, DGCA and MoD.

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Total Estimated Investment of Rs 86,000 Crores in Renewable Energy Power Projects During Last Three Years
May 05,2016

Most of the investment in renewable energy come from private sector. Total estimated investment in renewable energy power projects during last three years is around Rs. 86,000 crore. As per inputs provided by Central Electricity Authority (CEA), around 15,400 MU has been generated through solar energy during the last three years and it has met the energy requirement to that extent in the country.

The Government is promoting solar energy by providing fiscal and promotional incentives such as capital and/or interest subsidy, tax holiday on the earnings for 10 years, generation based incentive, accelerated depreciation, viability gap funding (VGF), financing solar rooftop systems as part of home loan, concessional excise and custom duties, preferential tariff for power generation from renewables, and foreign direct investment up to 100 per cent under the automatic route.

Under grid connected solar power schemes, the developer is decided through open and transparent bidding system. Under off grid solar programme, organisations who are interested in working in the sector can be empanelled as Channel Partners. The Ministry has empanelled Channel Partners for grid-connected roof-top, off-grid and solar water heater categories. The Government has revised the target of solar power from 20 GW to 100 GW by 2022.

However some developers are also importing solar cells, modules and other components. Technology is changing from time to time with new research. India is encouraging new and better technology.

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Government decides to do away with the Landing Certificates required under MEIS with effect from 4 May 2015
May 05,2016

Government with the approval of the Minister of State (I/C), Ministry of Commerce and Industry Smt Nirmala Sitharaman has decided to extend the market coverage to all countries in respect of Merchandise Export from India Scheme (MEIS) 2787 lines. Henceforth, Landing Certificates shall not be required under MEIS w.e.f. 04 May 2016. A Public Notice No.06 has been notified in this regard. Accordingly, revenue foregone under the scheme has been revised from Rs. 21,000 crore per annum to Rs.22,000 crore per annum. This step has been taken as part of ease of doing business and reduction of Transaction Cost of the exporters.

The Merchandise Export from India Scheme (MEIS) was introduced in the Foreign Trade Policy (FTP) 2015-20 on April 1, 2015. MEIS aims to incentivize export of merchandise which are produced/manufactured in India. At the time of introduction of MEIS on 01 April 2015, the scheme covered 4914 tariff lines at 8 digit level. Countries of the globe were grouped into 3 market categories (Country Group A, Country Group B & Country Group C) for grant of incentives under MEIS. Slight changes in lines covered etc. were made on 14 July 2015 and 15 July 2015. Thereafter on 29 October 2015, 110 new Tariff Lines at 8 digit level were added under the scheme. The rates/country coverage for 2228 lines at 8 digit level were enhanced. As on date, 5012 Tariff Lines at 8 digit level are eligible for rewards under MEIS. The annual resource allocation under MEIS was enhanced from Rs.18,000 crore to Rs. 21,000 crore in October 2015. The MEIS Scheme covers 5012 tariff lines.

Under MEIS Markets/countries of the globe are grouped into 3 categories for grant of incentives under MEIS:-

Category A: Traditional Markets (34)

Include European Union (28), European Free Trade Association(EFTA) (Switzerland, Norway, Iceland and Lichtenstein-4), USA and Canada(2).

Category B: Emerging & Focus Markets (140)

Include Africa (55), Latin America and Mexico (45), CIS countries (12), Turkey and West Asian countries (13), ASEAN countries (10), Japan, South Korea, China, Hongkong and Taiwan(5).

Category C: Other Markets (64)

Products which were not eligible to get incentives in all markets required submission of Landing Certificate as a proof of landing in the designated market. Out of total 5012 tariff lines under MEIS, incentives to 2787 lines was available only to limited countries. Therefore, it required submission of Landing Certificates for claims. Government had received many representations pointing out difficulties in obtaining landing certificate from Shipping Lines/Agents etc. Exporters also had to bear associated charges/cost on account of this procedure.

Keeping in view these facts, the Government with the approval of the Commerce and Industry Minister has decided to extend the market coverage to all countries in respect of these 2787 lines. Henceforth, landing certificates shall not be required under MEIS w.e.f. 04.05.2016.

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Centre asks States to use Rs 292 crores funds for fodder development and immediately prepare an action plan for this purpose
May 05,2016

Secretary, Department of Animal Husbandry, Dairying and Fisheries, Ministry of Agriculture & Farmers Welfare, Shri Devendra Chaudhry along with the Principal Secretaries of Animal Husbandry of all the States/ UTs took important decisions as:

i) Allocation of Rs. 292 crores of funds under the National Livestock Mission to various States/UTs. Use of these funds can be immediately made for taking up fodder development (growth and cultivation related activities) for which the NLM Action Plan (NAP) need to be prepared immediately so that the same is useful for ensuring fodder availability for the animals should the rainfall be deficient especially in States where there is already a shortage of fodder such as in Maharashtra, Karnataka, Rajasthan, Telengana, Madhya Pradesh etc.

ii) Rs.100 crores have been separately allocated under the Rashtriya Kisan Vikas Yojana (RKVY) under the sub-scheme of Fodder Development Programme under which assistance of up to Rs.3,200/- is provided per hectare (for a maximum up to 2 hectares) for fodder development in drought affected areas. Both these schemes NLM and RKVY can be dovetailed with MNREGA and an Integrated Plan inter alia be made.

iii) Fodder can be moved from surplus areas to the shortage areas and DAHDF would coordinate with the Ministry of Railways for transport of such fodder as may be required from surplus to the deficient States on payment basis to the Railways.

Secretary urged for an Action Plan may be made for the DAHDF Component for all these activities as above. He asked them to submit the utilization certificates of the funds released during previous years and submit the proposals for the current year by 15th May, 2016. The next video conference will be held on 19th May, 2016 as a follow up and to take up new issues.

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Permit Chinese Solar & Wind Power Panels & Equipment With Proper Quality Checks, Says Punjab Energy Development Agency
May 05,2016

A conference on n++Achieving 100 GW of Solar Dream by 2022n++ under aegis of PHD Chamber of Commerce and Industry unanimously demanded governments intervention to halt the unregulated large influx of solar and wind power panels and equipment from China as most of them are manufactured with sub-standard materials and have the hidden potential to endanger the solar and wind mission of India.

A collective call was also given on the occasion to forewarn the Indian banks not to have excessive exposure to fund such sub-standard imports to facilitate developers of solar and wind energy in India as without proper quality checks, their funds might face a risk of heavier mis-appropriation.

Chairman & Managing Director, IREDA, Mr. K S Popli who inaugurated the Conference duly endorsed the views expressed during the occasion adding that large banks in India are perhaps reluctant to fund the solar and wind projects due to this reason though no developers in these two segments have defaulted on re-payment though might have delayed the pay off schedule.

Mr. Popli further added that his institution the IREDA might be converted in to Green Bank without under going any altercation in its basic structure to enable it access the foreign funding from overseas banks that are currently not supporting the solar and wind funding barring the well known KFW.

n++With IREDA conversion into Green Bank, it would be entitled to avail of certain benefits, which the agency is currently deprived of and the proposal is being well supported by the Union Power Ministryn++, said Mr. Popli without specifying any time period for the move to take off.

The Chief Executive, Punjab Energy Development Agency, Dr. Amarpal Singh emphatically demanded the intervention of the central government to check the rapidly rising imports from China for its solar and wind panels including various other equipment as their quality is suspect and cannot sustain solar and wind power generation beyond a period of five years.

n++The banks especially in the public sector segment have the 70% exposure to fund solar and wind equipment and panels and in the given scenario, their money is at large risk. Therefore, even the banks should use their prowess and pressurize the government to restricting imports of panels and equipment from China so that Indian solar and wind mission takes off without any possible disruptionn++, said Dr. Amarpal Singh.

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Special Financial Package for North East
May 05,2016

Rs.33097.02 crore has been allocated for the North Eastern Region by 56 Central Ministries/Departments including Rs.2400 crore provided to the Ministry of Development of North Eastern Region (DoNER). The budget allocation to Ministry of DoNER includes funds for the Non-Lapsable Central Pool of Resources (NLCPR) scheme and the scheme of North Eastern Council (NEC). In addition to the above, an amount of Rs.1000 crore has been allocated for grants to Autonomous Councils, areas covered under the Sixth Schedule of the Constitution. The Ministry has also been receiving, from time to time, proposals from State Governments including through their priority lists for possible funding under the NLCPR scheme and NEC schemes which have been taken up within the budgetary provisions of the Ministry.

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All Metros asked to speed up appointment of Independent Directors and promote efficiency
May 05,2016

All Metros across the country being built and operated with Central Government equity have been asked to promote efficiency while hiring manpower and in procurement by taking necessary measures. This was conveyed by Shri Rajiv Gauba, Secretary (Urban Development) during a review of progress of various metro projects and issues related to their functioning. Issues ranging from appointment of Independent Directors and Chief Vigilance Officers, standardization of equipment, bulk procurement, fare fixation, performance based promotions, competitive bidding, security etc., were discussed during the two hour long review exercise.

A proposal for appointing a common Regulator for all metro projects for fare fixation was discussed and it was decided that the views of respective States would be appropriately taken into consideration in this regard while taking a decision. Officials of Metro projects opined that since the losses on account of metro operations were to be borne by respective States under the law, their views need to be factored while considering a common Regulator.

Shri Rajiv Gauba urged all metro operators to ensure early appointment of Independent Directors on the Boards including at least one woman Director as required under the Companies Act, 2013. He also called for early appointment of Chief Vigilance Officers by respective Boards in consultation with Chief Vigilance Commissioner.

Stressing on the need for efficiency in project management and metro operations, Shri Gauba suggested Fast Track Promotion policy as appropriate for consideration by respective Boards to attract good manpower talent.

He also asked Delhi Metro Rail Corporation (DMRC) to come out with a Draft Tender Document within 3 months to facilitate common bulk procurement of various equipment required by different metros to take advantage of economies of scale on the lines of what is being followed in respect of 7 Ultra Mega Power Projects. Directing the concerned officials in the Ministry of Urban Development to finalise Standardisation of norms for different components including the rolling stock in the context of expansion of metro cities in 3 months, Shri Gauba emphasized the need to promote indigenous production of such equipment under Make In India. He said that while finalizing standard norms for metro equipment, changes in technology needs to be factored in.

During discussion on recovering the cost of providing security for metro services and in premises through metro fares, it was felt that this needs to be considered in the context of security being a sovereign function of the States.

On the issue of sharing of costs on account of foreign exchange fluctuations, it was informed that this issue was referred to the Ministry of Finance and their response is awaited.

Shri Gauba complimented Lucknow Metro for being in a position to commission the priority section of 8.50 km of North-South Corridor between Airport and Charbagh Railway Station by the end of this year. Work on Lucknow Metro started about two years back.

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Agreement with Russia for setting up Kudankulam Units 5&6
May 05,2016

An Inter-Governmental Agreement (IGA) between Government of India and Government of Russian Federation was signed in December 2008 for setting up units 3 to 6 at Kudankulam, Tamil Nadu in technical cooperation with Russian Federation. Discussions on the draft General Framework Agreement for setting up Units 5&6 (KKNPP 5&6) are currently in progress.

The project is planned to be set up on technical cooperation basis with shared scope of work. The Indian private industry would be involved in supply of equipment, execution of the works contracts, providing services in Indian scope of work and localisation of components.

The Kudankulam site was found to have an optimum potential for locating six units each of 1000 MW by the Site Selection Committee of the Government. The Government accorded in principle approval for setting up of Units 5&6 at Kudankulam in October 2009, in addition to Units 1&2 then under construction and Units 3&4 which were accorded in principle approval earlier. Regarding the cost of Units 5&6, discussions are in progress on the Techno-Commercial Offer submitted by the Russian side. The cost will emerge on conclusion of the discussions.

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Premium Bus Service in Delhi, on pilot basis from 1st June 2016, says Mr. Gopal Rai at PHD Chamber
May 05,2016

Even though there has been high usage of the metro in the second phase of the odd and even programme, yet the bus transport has not been used to its full potential, said Mr. Gopal Rai, Minister of Transport and Rural Development, Government of NCT of Delhi at the 2nd Smart Transportation Infra Summit & Expo organized by the PHD Chamber of Commerce and Industry.

There is a change in the mindset of the youth whose youthful love for cars and bikes is now being replaced by the consciousness to follow the odd and even programme for a better quality of life.

Mr. Rai expressed his concern over the app based taxi aggregation who have been earning excessively well during the second phase of the odd even, through charging a high surcharge.

The government will check the high surcharge being charged and will let the taxis do business only through fair means, he said.

There is need for a Premium Bus Service in Delhi for the passengers to commute and Government is in the process of its implementation as a pilot project from 1st June 2016, said Mr. Gopal Rai

He requested the manufacturers and businesses to join the governments initiative to implement this project.

Out of the 25 lakh cars in Delhi, only 8000 cars have been challaned during the second phase of the odd and even drive in Delhi, said Mr. Rai.

A common effort through public and government co-operation will promote the successful implementation of any scheme, said Mr. Gopal Rai.

Mr. Rai also said that the odd and even system started in Delhi is not only being talked of within the country but world over.

Mr. Rai also stated that the second phase of the odd and even system in Delhi was followed by 99.9% people.

Positive energy is limited and to sustain it an efficient system is needed, said Mr. Gopal Rai. He said that the Delhi government is consciously working to sustain this positive energy through its efforts to create public transport.

Mr. P.S Ananda Roa, Executive Director, Association of State Road Transport Undertakings (ASRTU) expressed that the solution to the problem of traffic congestion and pollution lies in the creation of mass public transport.

Mr. Radhe Shyam Sharma, Chairman Standing Committee of South Delhi Municipal Corporation, said that farsightedness in needed while framing policies and plans for the transformation process to become successful.

He also urged the government to address the issue of parking facility and earmark spaces for parking in colonies.

Mr. Sharma also pointed out that multi level parking facilities have to be created to deal with the problem of traffic congestion.

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Odd-Even got 5.4 out of 10, majority agrees to implement permanently: PHD Chamber Survey
May 05,2016

Odd-Even rule has got a score of 5.4 out of 10 according to an extensive survey conducted by PHD Chamber of Commerce & Industry to assess the commuters reaction.

Relaxation in traffic and reduction in time taken to reach the destination has got a score of 5.7 each out of 10. The respondents reported that the time taken to reach their destination has come down, though not considerably.

Although some parts of Delhi have seen reduction in traffic, yet some areas suffer from traffic congestion. Some parts of Delhi need proper regulation of traffic and better road networks, said Mr. Saurabh Sanyal, Secretary General of PHD Chamber of Commerce & Industry.

The Odds Even So Far:

Parameters: Score-

Relaxation in traffic congestion: 5.7

Reduction in the time taken to reach destination: 5.7

Odd-even formula to be implemented permanently: 6.2

Preference to buy a second car if the rule is implemented permanently: 4

Facilitation of public transport system: 4.3

Decline in pollution levels with the implementation of odd-even formula: 5.8

Overall travelling experience, tougher or easier: 5.8

Total average: 5.4

The survey aimed at knowing if the odd even formula has really been successful or it still lags behind in drawing commuters satisfaction. An extensive questionnaire was administered on more than 1000 people from a variety of segments across Delhi NCR. The survey gathered a mixed response from the respondents.

The sample size was selected such that responses would be unbiased to enable comparative analysis. Seven parameters were selected to know the benefits of odd-even.

Majority of Respondents want the rule to be implemented on a permanent basis as this parameter has scored 6.2 out of 10, given the fact that government take their suggestions seriously on this issue.

Respondents reported that they will not buy an additional car if the rule is implemented permanently as this has got a low score of 4 out of 10. This calls for efficient cab pooling system and sound public transportation system.

Facilitation of public transport system has got a low score of 4.3 out of 10. Respondents believe that this rule if implemented in true letter and spirit will certainly bring down pollution levels in the city as this parameter has received a good score of 5.8.

Majority of people reported that their overall travelling experience with the advent of odd even rule has been easier. This parameter has managed to get a good score of 5.8 out of 10.

For the success of this rule, the public transport system needs to be strengthened so as to ensure connectivity to far away areas and availability of means of transport at every point. Also the office hours should be made flexible so that traffic is distributed evenly, said Mr. Saurabh Sanyal.

Plantation drives should be actively carried out by the government in all parts of the city to make it greener and cleaner. Also odd-even should include trucks as these do not adhere to the emission norms. People should switch to greener fuel options, going ahead, said Mr. Sanyal

Going ahead, the state government must also strengthen pollution checks for all vehicles. Further, lane driving should be encouraged by the government with strict penalties and fines for lane jumping for all vehicles, he said.

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Ind-Ra Maintains Negative-to-Stable Outlook on Shipping Sector for FY17
May 05,2016

India Ratings and Research (Ind-Ra) has maintained a negative-to-stable outlook for the shipping sector for FY17 on the expectation of varied trends across sub-segments. The tanker segment which accounts for the bulk of the fleet operated by Indian shipping companies (about 60%) is likely to continue performing better than other shipping segments due to its sound fundamentals. However, the dry-bulk, off-shore and container segments will remain under pressure in FY17.

Sub-sector outlooks for FY17 are as follows:

Stable Outlook for Tanker Segment: The agency expects the performance of the tanker segment to remain better than other segments in FY17 owing to healthy demand, manageable supply growth and continuation of the recent increase in long-haul shipments from West Africa to Asia. After the fall in crude oil prices, tanker charter rates had increased rapidly in 2015 owing to a higher crude oil output, strategic reserve stock-piling and floating storage. However, charter rates declined in 4QFY16 as the incentive of storing oil has reduced with oil prices remaining range-bound. The agency expects the charter rates to decline further in FY17; nevertheless the correction will be limited as demand for oil is likely to continue to grow at a healthy pace.

Negative Outlook for Offshore Segment: The agency does not expect a significant recovery in oil prices in FY17 and therefore expects offshore exploration activity to remain muted globally which will result in continued pressure on charter rates. Revenue of Indian companies which have deployed vessels on overseas waters declined during 9MFY16 as a result of the decline in demand for offshore drill ships, jack-up rigs and other support vessels which resulted in lower charter rates. Financial profiles of such companies are likely to weaken further in FY17. The agency expects Indian public sector units to continue offshore capex activities in FY17, however charter rates are likely to be renegotiated at lower levels when vessel contracts come up for renewal. Consequently, the financial profiles of companies catering largely to public sector units are also likely to deteriorate in FY17.

Negative Outlook for Dry Bulk Segment: The agency expects the dry-bulk to be the worst-performing segment among all the shipping segments in FY17. The slowdown in emerging and developing economies particularly in China has exacerbated the demand-supply mismatch in the dry-bulk segment. The agency expects freight rates to remain depressed in FY17 as Chinese demand remains subdued. Furthermore, growth in dry-bulk shipment volumes at Indian ports is also likely to remain limited in FY17 due to lesser imports of both coal and iron ore because of higher domestic production. Dry-bulk volumes at Indian ports (major and non-major) remained sluggish in 1HFY16 owing to the lower shipments of coal (1HFY16: 0.7%, FY15: 20.1%) due to the record domestic production by Coal India Limited. Also, iron ore shipments declined (1HFY16: negative 37.1%, FY15: 1.7%) due to lower imports.

Negative Outlook for Container Segment: The agency expects pressure on container charter rates to continue in FY17 on account of slow growth in global trade volumes coupled with continued capacity additions. Capacity additions in FY16 continued to outpace trade growth with global fleet capacity growing 6.8% yoy (FY15: 6.2%). Furthermore, the global order book as a % of outstanding capacity remained substantial (16.9%) indicating that further capacity is yet to come into the market. The agency does not expect the supply-demand gap to correct in the near term.

Mixed Impact on Credit Metrics: Ind-Ra expects the credit metrics of companies operating solely in the offshore segment to deteriorate further in FY17. Companies which derive a majority of their revenue from the tanker segment saw an improvement in their margins and consequently credit metrics during 9MFY16. Entities having a larger exposure towards the tanker segment are likely to exhibit stable metrics in FY17. Nevertheless, leverage indicators of most shipping companies are expected to remain high in FY17 as performance across most segments will remain subdued.

Outlook Sensitivities

Demand-Supply Change: A higher-than-expected capacity addition in the tanker segment could lead to the outlook for the segment being revised to negative.

Improvement in Trade Activity: An improvement in trade activity leading to an improvement in the demand-supply scenario could lead to a revision in the outlook for the container and dry-bulk segments to stable.

Recovery in Crude Oil Prices: An increase in crude oil prices leading to an improvement in capex activity by exploration and production companies leading to higher charter rates could lead to a revision in the outlook for the offshore segment to stable.

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