Aviation, Oil and Gas and Power – all vital infrastructure sectors have been smashed by the pervasive spread of COVID-19 and the resultant lockdown and stoppage of economic activities. Trends indicate that 2020 is a lost year, a zero year; the world is battling a virus that is spreading at a ferocious speed. Staying indoors, ending travel and halting most work is the only known method to staying safe. Inevitably, this comes at a huge cost. We bring you in-depth research and extensive news on the extent of this financial wreckage in the reported sectors. All components of the value chain have been severely hit. All want reliefs from the government in the form of interest reductions, moratorium on payments and financial package.
In the aviation sector, estimates are dire. According to CAPA – Centre for Aviation, the Indian airline industry including companies providing auxiliary services like airports and ground handlers could incur losses of between $3.3 to 3.6 billion in the first quarter ending June 2020. This was based on the assumption that the airlines are not grounded beyond when the Lockdown 1.0 ended on April 15. We are in Lockdown 3.0 now! IATA has also predicted massive attrition: 575,000 jobs and $3.2 billion in revenues. The assets are shrinking. Delivery of nearly 200 planes to Indian carriers are bound to be deferred by atleast two years. Carriers are returning aircraft to lessors. Air India disinvestment will be pushed down the road. On the passenger side, airlines are dealing with cancellation by ticket credit schemes and are not refunding because there are no cash flows.
Everyone wants aid from government – airline companies, airport operators, ground handlers, airport shops and lounges. Linked with aviation, is the tour and travel industry which is completely shuttered. It is reeling from the pandemic impact. According to industry estimates, around 70 pc of the 5.5 crore people directly and indirectly employed by the industry could lose their jobs.
In the oil and gas sectors, refineries are facing inventories problems, some are adjusting output to demand, cutting crude processing and some are declaring force majeure. There is near total demand destruction and sales of petrol, diesel and gas have all plummeted. Oil producers are seeking tax reliefs from government through reductions of royalty, cess and profit petroleum payable to government. Industry bodies are demanding cuts in excise duty and VAT on petro products. Petroleum dealers, who have seen their business dry off, want a year’s exemption on interest on bank loans and no statutory fee. On the flip side, government is cashing in on the crashing crude prices. India is topping up on its strategic reserve capability. On the taxation front, the government has raised Rs 3/litre in taxes and armed itself with powers to raise special excise duty on Petrol and Diesel by upto Rs 8/litre in the future. States are likely to raise VAT, some have already done it. Money is required to extract the economy from the COVID-19 mess, realizations are now low but with a staggered exit from lockdown this will improve.
In the power sector, consumption has nose-dived. Most discoms are invoking force majeure, gencos are straddled with mounting outstandings. No one is buying coal or making payments. The must run status for RE power is under threat. Read this edition on for full details.
