Foreign Airlines Like Emirates Are Pleading For More Capacity Into India But The Government Says No

• <00:55> Credit policy is coming up. Will interest rates hold or not ?
• <02:38> The Government says it will pump over 89000 crore into the haemorrhaging BSNL
• <07:38> Foreign airlines like Emirates are pleading for more capacity into India but the Government says no with Kapil Kaul
• <16:55> Hmm..while inflation and interest rates are down, rents and cost of living continue to rise, Mumbai is the most expensive city to live in, for expats.

TRANSCRIPT

NOTE: This transcript contains only the host's monologue and does not include any interviews or discussions that might be within the podcast. Please refer to the episode audio if you wish to quote the people interviewed. Email [email protected] for any queries.

Good morning, it's Thursday morning, the 8th of June and Im Govindraj Ethiraj, coming to you from Mumbai, India's financial capital..

1. Credit policy is coming up. Will interest rates hold or not ?
2. The Government says it will pump over 89000 crore into the hemorrhaging BSNL
3. Foreign airlines like Emirates are pleading for more capacity into India but the Government says no. A conversation with Kapil Kaul of CAPA India.
4.Hmm..while inflation and interest rates are down, renta's and cost of living continue to rise, Mumbai is the most expensive city to live in, for expats.

Borrowing costs are rising for everyone, I mentioned yesterday that a Bank of Baroda research study that looked at over 2,000 company financial results found that weighted average lending rate on fresh loans had increased from 7.6% in March 22 to 9.3% in March 23.
And yet, credit grew at 15% compared to 9.6% the previous year.
If you had taken a home loan two years ago, you would have paid 6.75% or so. If you were to approach one of the banks today, you would pay between 8.4 to 9.0% or a little over that.
The Reserve Bank of India is now expected to pause rate hikes today for a second consecutive month, partly because it realises we are all starting to hurt and second, inflation is easing.
A survey of 40 economists by Bloomberg have forecasted that the RBI would keep the repurchase rate unchanged at 6.5%
Also, India saw strong growth in the last quarter of last financial year with GDP growth for the full year at a relatively unexpected 7.2%. This makes India one of the fastest growing large economies.

Moreover, consumer price growth slowed to 18-month low of 4.7%, closer to the midpoint of the RBI's 2%-6% target range.
India won't be alone if it does not hike rates further. Many global central banks are holding on as they assess impact of previous hikes, see how the transmission is happening as well as commodity prices that are now falling.

BSNL gets more taxpayer money
The Indian Govenrment has approved a revival package worth Rs 89,047 crore for Bharat Sanchar Nigam Ltd (BSNL) the telecom operator that is owned by the Government of India.
This is the third revival package of Rs 89,047 crore for debt-ridden telecom company.
The government approved the first revival package for BSNL/MTNL in 2019. It amounted to Rs 69,000 crore and in 2022, the Centre again approved the second revival package for BSNL/MTNL amounting to Rs 164000 crore.

It's the kind of announcement that makes my free market heart skip a beat. Knowing that this is rarely a story that ends well, particularly when a state-owned struggler is in all out competition with the most aggressive Indian industrial competitors as opposed to a Government company commanding a near monopoly like ONGC or Indian Oil.
The money that will be raised will go to support BSNL and of course provide faster mobile networks particularly in parts of India including border regions where private operators may not provide the same. And pay for salaries.
BSNL has according to reports has begun installing some 20,000 4G towers and is also targeting some 25,000 villages which don't have any connectivity.

The sum of Rs 89,000 crore for a company that is haemoraging is not a pleasant site at a time when the Governmenet should be reducing its exposure.
But telecom is a funny business and has become funnier or deadlier after Reliance Jio came in and swept away customers, the market and market share to the detriment of all other players. It all depends on where you sit or stand.
Indeed, it would be easier to argue for BSNL to be privatised or sold off if private company Vodafone Idea did not sell itself to the Government or offer a 33% stake in the company in lieu of various payments including the cost of spectrum.
So the Government owns BSNL and MTNL, the latter struggles to provide mostly land lines in Mumbai and Delhi and has been on ventilator support for a while and of course Vodafone Idea in which the Government owns 33% via the Department of Investment and Public Asset Management.
To give you a experiential view of MTNL, it took us three visits and multiple phone calls to the local MTNL office just to establish that there was no line into the building I shifted into a few years ago. Nor would there ever be.
"Sir, I recommend you go with one of the private players. It does not look like we are going to lay a line there now," a trying to be helpful and i assume frustrated assistant engineer finally told me.
BSNL has wireline and wireless services which you are likely to see or experience more in some cities and towns versus others. It has around 27,329 telephone exchanges with a capacity of 22 million lines serving around 7 million customers. If you don't remember telephone exchanges, well, I want to but can't blame you. Guess you could Google it.
On the wireless side, BSNL provides around 113 million mobile connections with 2G, 3G and 4G technology with 3G now available in 6,272 cities and towns according to the company itself.
BSNL employs over 60,000 people and had an income from services of Rs 20,698 crore and losses of Rs 8,116 crore.And an all inclusive salary bill alone of Rs 8,006 crore.
While it could be argued that telecom is a sensitive business over which the Government should have some oversight and perhaps control, it is not clear why, if we could (finally) sell Air India, we should not be setting the ground and stage for a full privatisation or some level of change in management. About time.
Now, just to give you further context of market shares for wireless subscribers.
Reliance Jio is at 422 million, Bharti Airtel is 370 million and Vodafone Idea is at 236 million.BSNL well, has around 105 million but lower active subscribers.and less than 10%.
Former finance minister Arun Jaitley said that if private carriers could carry 80% of India's passenger traffic, there was no reason they could not carry the other 20% too.
He was making a case for Air India's privatisation which as you know finally did happen.
I was unable to get out the exact employee numbers for the other three companies but they seem much less compared to BSNL and obviously have more subscribers and no telephone exchanges. The telephone exchanges by the way are valuable real estate which will hopefully be monetised and faster.
So to conclude at least for now, the 33% that the Government owns in Vodafone is worth more in subscriber base than it's own BSNL. Am pretty sure the yields are way higher though of course Vodafone's finances are not in good shape now. And that's another story.

Emirates

Fares into and out of India have been sky high for some time and are refusing to relent, at least for now. Obviously this is linked to capacity of which there is not enough.

Aviation consulting and research company CAPA India says are roughly 72 million international passengers in and out of India right now while demand at this point is for around 88 million. Domestic demand is around 160 million.

In the international pie, roughly 55% of traffic is carried fby forieng arilines while 45% is carried by Indian carriers.

AIrlines like Emirates are now openly canvassing for more capacity into India. Emirates Airline's President Sir Tim Clark earlier this week said the group has had no increase in seats in India since 2015 and during this period, the country's economy has grown at a great pace.

However, the government is not in favour of granting additional seats or bilaterals as they are called..

Emirates, which operates only wide-body A380s and B777s, flies to nine Indian cities and operates more than 160 weekly flights to India. Emirates can operate 65,000 seats from Dubai to India in each direction every week.

The Government also refused United Airlines to codeshare with Emirates on routes from India. The permission to codeshare was apparently denied as this is not covered under the traffic rights agreement between India and Dubai.

United is flying fewer routes to India because it is not flying over Russia.

All in all not a good week for Emirates. What does this mean for overall capacity and demand in India and more importantly, what can we make of how fares could go in the next year or so.

To speak on this, I am now joined by Kapil Kaul, CEO and Director of CAPA India.

Hmmm..

even as we rejoice in the prospect that interest rates may not go up and I will not have to picket outside the Reserve Bank of India's head quarters in Ballard Estate, Mumbai, elsewhere, the vice is tightening.

For the second year in a row, Mumbai emerged as the most expensive Indian city to live for expatriates, a report said on Wednesday.

Mumbai and Delhi were among the top 35 most expensive cities in Asia for expatriates.

According to Mercer's 2023 Cost of Living survey, Mumbai has has seen an increase of 13 to 15 per cent in rental prices in 2023 as compared to 2022. This was the highest among all other cities surveyed for the report.

Obviously, if rentals are rising for expats they are mostly rising for others too and in most parts of the cities.

On the other hand, almost all Indian cities surveyed showed a rise in the cost of living, mainly in turn due to a rise in rents and the cost of essential commodities like fruits, vegetables, and milk.
Did you want to know the least expensive places to live in ? Well, one is Havana in Cuba, a little far and the language may be a problem. That was followed by Karachi and Islamabad.

Author:   Govindraj Ethiraj

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