ANALYSIS OF CEMENT INDUSTRY, WATER MANAGEMENT SECTOR AND

AVIATION SECTOR AS AN INVESTMENT AVENUE

FINANCE SEMINAR PAPER

HARDIL BATRA
TYBBA A003

Contents
ABSTRACT ................................................................................................................................................ 3
OBJECTIVES ............................................................................................................................................. 3
REVIEW OF LITERATURE .......................................................................................................................... 4
CEMENT INDUSTRY ................................................................................................................................. 8
MARKET OVERVIEW .......................................................................................................................... 14
EXPORT AND IMPORT OF CEMENT ................................................................................................... 15
INSTALLED CAPACITY AND KEY MARKETS IN EACH OF THE GEOGRAPHIC REGIONS........................ 16
STRATEGIES ADOPTED ............................................................................................................... 17
SUCCESSFUL USE OF ALTERNATE FUELS IN CEMENT PRODUCTION ........................ 17
GROWTH DRIVERS AND OPPORTUNITIES ............................................................................. 18
POLICIES AND INITIATIVES ....................................................................................................... 19
INVESTMENT SCENARIO ............................................................................................................ 19
WATER MANAGEMENT PROJECTS. ....................................................................................................... 20
KARNATAKA INTEGRATED URBAN WATER MANAGEMENT INVESTMENT PROGRAM ..................... 23
NAL SE JAL SCHEME .................................................................................................................... 28
AVIATION SECTOR ........................................................................................................................... 29
THE INDIAN AVIATION SECTOR ............................................................................................... 29
ROLE OF AIRPORT INFRASTRUCTURE IN NATIONAL ECONOMY .................................... 32
OBJECTIVES OF POLICY.......................................................................................................... 32
THE CHAOS OF THE AVIATION SECTOR ................................................................................. 33
Air India ........................................................................................................................................ 34
Air Sahara ..................................................................................................................................... 35
Jet Airways .................................................................................................................................... 35
SpiceJet ......................................................................................................................................... 39
BIBLIOGRAPHY ...................................................................................................................................... 42
ABSTRACT

The aim of this project is to enlighten the reader of this paper on three shortlisted
sectors of the financial markets viz. the Cement industry, the Water management
sector and the Aviation sector. This paper also aims to deal with the future scope of
the top airline companies in India with the help of a comparative study post the
aviation industry chaos in the year 2019.

OBJECTIVES

• To analyse the financial market in the Cement industry

• To understand the equity markets affiliated with water management projects.
• To examine the recent (2019) chaos of the Aviation sector.
• To compare the future scope of top airline companies in India.
REVIEW OF LITERATURE

Jayant Sathaye, Lynn Price, Stephane de la Rue du Can, and David Fridley -
Assessment of Energy Use and Energy Savings Potential in Selected Industrial
Sectors in India, ERNEST ORLANDO LAWRENCE BERKELEY NATIONAL
LABORATORY, LBNL-57293
The study revealed that, the Indian cement industry has grown rapidly over the past
few decades and there have been significant investments in new cement kilns and
associated production equipment. This has led to a situation where India’s cement
industry in made up of both some of the world’s most energy-inefficient plants as well
as some of the world’s best practice facilities. The challenge for the Indian cement
industry is to modernize or phase out the older, inefficient plants while acquiring the
best possible cement production technology as production inevitably expands in the
coming decades.

Petia Topalova- Overview of the Indian Corporate Sector: 1989–2002 IMF Working
Paper Asia and Pacific Department, WP/04/64
Petia (2004) discussed in his study about performance of India’s non-financial
corporate sector since 1989, by using firm level data and evaluated its financial
vulnerabilities. He has found that promising trends in liquidity, profitability and
leverage of the sector emerged in the early 1990s; he has experienced a reversal after
1996. Nevertheless, most indicators were still at comfortable levels, and there was
evidence of improvement in 2002. The study also revealed that a number of firms still
face problems servicing their debt obligations, posing a risk to lenders. He has
concluded that aggregate interest 37 coverage of the corporate sector indicated that
potential non-performing loans of the corporate sector remain high and this
underscores the need of the corporate sector remain high. He suggested this
underscores the need for close monitoring of the corporate sector in the future.

Information Technology Directorate Information Systems Organisation Water Planning

& Projects Wing Central Water Commission New Delhi, May, 2010
This publication by the Central Water Commission presents data on Major and
Medium Irrigation and Multipurpose projects, Minor Irrigation projects, Command
Area Development scheme as available in the Finance Accounts of the Union and
State Governments brought out by Comptroller and Auditor General of India and
Accountant General of respective states. These accounts provide audited revenue
receipts and expenditure on various economic activities of irrigation projects.
The financial performance analysis is also important for assessment of the economic
viability and long-term sustainability of the projects particularly so in the context of
developing countries like India for optimal utilization of limited resources.

Jaxay Shah, President, CREDAI National- Impact of RERA on the industry, The
Hindu
The implementation of RERA has been nothing short of a game changer for the real
estate sector. However, there is a clear disparity between States with regards to the
implementation, with regions such as Maharashtra setting the benchmark in the
industry. This article betters the understanding of implications of RERA on the
industry.

How RERA changes the real estate landscape, The Financial Express published: May
9, 2018
Regarded as an unorganised and fragmented sector, marked by lack of transparency
and lopsided builder-buyer relationships, the implementation of the Real Estate
Regulatory Authority (RERA) Act with effect from May 1, 2017, was a stepping stone
to bring about a change in the way the real estate sector operated. It was beset by
noticeable issues like delays in possession/completion of projects, skewed
builderbuyer agreement terms favouring the developers, prevalence of cash in
property transactions, and existence of many fly-by-night developers who had limited
financial and operational experience of carrying out the real estate business.
Consequent to many such issues resulting in plunging consumer confidence, coupled
with overall elevated prices and the subdued macro environment, the real estate sector
had witnessed a slowdown in demand. This paper analyses the same bullet points in
an effective manner

Nal se Jal: Water, sanitation may attract ₹6.3-lakh crore investment, says report PTI
New Delhi | Updated on July 14, 2019 Published on July 14, 2019
With the announcement of the Nal se Jal scheme, the water and sanitation sector is
likely to attract investment worth ₹6.3 lakh crore in the next five years, according to a
report.
The JM Financial Institutional report said the government’s new scheme, which aims
to provide piped water connection to every household by 2024, will likely lead to a
massive jump in investments in water and sanitation. The paper tries to analyse the
same.
Lalatendu Mishra - Investment in water infra will spur growth, The Hindu
Indian economy is a part of a ₹100-lakh crore ambitious investment plan for the next
five years. Certainly, the investments in water-related projects are a step in the right
direction. The focus on capital outlay was subdued during the first half of CY19 due
to the general elections which must have impacted aggregate growth, and a renewed
focus on infrastructure development will go a long way towards boosting aggregate
demand in the economy. This article highlights the prospects of water industry in
India.

RajeshU. Kanthe- Challenges Of Indian Aviation Industry In Chaotic Phase

This paper enlightens bout the journey of the Indian aviation sector and it has pointed
out its peculiar weaknesses. This paper discusses and reviews the challenges faced by
aviation companies which Include shortage of workers and professionals, safety
concerns, declining returns and the lack of accompanying capacity and infrastructure.

Ashish Dhawan, Nidhi Mishra, Nithya R, Payal Yadav, Rajesh B, Siddharth Dahiya,
Siddhartha Butalia - Study of the Indian Aviation Industry.

This paper has presented a detailed study of the Indian Aviation Industry substantiated
with tables and statistics. This has enhanced a smooth understanding of the subject.
The statsistics available in the paper has been extracted from this study.

Corporate Finance and Infra Banking, YES BANK- Opportunities and Financing
Outlook for Aviation sector, March, 2018
FICCI Knowledge Report on “Opportunities and Financing Outlook for Civil
Aviation Sector”, highlights the key market trends and outlook for Airports, Airlines,
General Aviation and MRO. The report analyses traditional financing tools used by
Aviation stakeholders vis-à-vis innovative financing techniques that can be adopted
for raising low-cost funds.

C. Ratnam Nadar - A Dissect of Indian Airport International Journal of Current

Research Vol. 8, Issue, 11, pp.41613-41630, November, 2016
This study attempts to explore and focuses the framework for developing categories of
an India. Strong GDP growth, a young population and the expansion of India’s vibrant
middle class is expected to see India achieve some of the fastest growth of any aviation
market in the world over the next 20 years.
Indian Aviation Industry Report- 2019, , Press Information Bureau, Directorate
General of Civil Aviation (DGCA), Airports Authority of India (AAI), Interim Union
Budget 2019-20
The civil aviation industry in India has emerged as one of the fastest growing
industries in the country during the last three years. India is currently considered the
third largest domestic civil aviation market in the world. India has become the third
largest domestic aviation market in the world and is expected to overtake UK to
become the third largest air passenger* market by 2024. The study focuses on the
future scope of the aviation sector in the Indian Economy.
CEMENT INDUSTRY
In India, the cement industry is the second most consumed material on the planet. The
cement companies have seen a net profit growth rate of 85 per cent. With this huge
success, the cement industry in India has contributed almost 8 per cent to India’s
economic development.
Cement is a global commodity, manufactured at thousands of local plants. The cement
industry in India is dominated by around 20 companies, which account for almost 70
per cent of the total cement production in India.
Because of its weight, cement supply via land transportation is expensive, and
generally limited to an area within 300 km of any one-plant site. The industry is
consolidating globally, but large, international firms account for only 30 per cent of
the worldwide market. China is the fastest growing market today. Because it is both
global and local, the cement industry faces a unique set of issues, which attract
attention from communities near the plant, at a national and an international level.
Indian industry uses energy more intensively than is the norm in industrialized
countries. While selected modern Indian units often display very high efficiency that
approaches world best practice levels, the average intensity lags world best levels.
Indian industry has undergone a transformation since 1991, the year the economy was
opened to foreign investment and competition. Energy per unit of valued added in the
industrial sector has declined since then. However, there still remains considerable
scope for continued improvement of energy efficiency in Indian industry, and for
learning from both worldwide and Indian best practices.

This scoping study assesses the intensity of energy use in Indian industry, identifies
national and worldwide best practice energy intensity levels, and on the basis of the
above assessment provides guidance on areas for improving energy efficiency. This
work focuses on five energy-intensive industrial sectors -- fertilizers, textiles,
chloralkali, cement, and petroleum refining.
The intent of the scoping study is to increase knowledge and sector-specific
understanding about industrial energy use in order to assist Indian industry, the
Bureau of Energy Efficiency, and concerned stakeholders in efforts to improve energy
efficiency in this sector in the country.

The approach used involves assessing the current trends in output and value added in
Indian industry, energy use by fuel type and electricity use in the above sectors, and
indicators of energy intensity. In addition, Lawrence Berkeley National Laboratory
(LBNL) assessed the types of energy conservation measures that industry could adopt
to improve efficiency, and compared these with worldwide best practices in each of
the above sectors.
It is recognized that cement and chlor-alkali sectors have limited numbers of
technologies and are easier to assess, while fertilizers and refining are more difficult
because of more complex plants, and finally textiles is even more difficult because of
the large numbers of plants in the unorganized sector and the diversity of processes
used.
LBNL has relied largely on published literature for this assessment. Earlier studies
have reported extensive potential for improving energy intensity in these sectors (Sethi
and Pal, 2001), and a recent report by USAID corroborates these findings (Deneb,
2002). 1-2 Lawrence Berkeley National Laboratory (LBNL) has previously evaluated
energy efficiency potentials for the Indian fertilizer sector (Schumacher and Sathaye,
1999a), the cement sector (Schumacher and Sathaye, 1999b), and energyintensive
industries overall (Mongia and Sathaye, 1998a and 1998b; Mongia, Schumacher, and
Sathaye, 2001, Roy et al., 1999). In addition, LBNL staff assisted the Industrial
Development Bank of India (IDBI) in setting benchmarks for 12 industrial sectors in
order to select enterprises that would be worthy of modernization loans from the Asian
Development Bank (Sathaye, Gadgil and Mukhopadhyay, 1999).
India is the second largest producer of cement in the world. In 2003, India produced
115 million metric tons (Mt) of cement, behind China (750 Mt), but ahead of the U.S.
(93 Mt) and Japan (72 Mt) (UNESCAP, 2004; van Oss, 2004). India’s cement
industry – both installed capacity and actual production – has grown significantly over
the past three decades, with production increasing at an average rate of 8.1% per year
between 1981 and 2003.
The Indian cement industry is comprised of 125 large cement plants and 300
minicement plants, with installed capacities of 148.28 and 11.10 million metric tons,
respectively (Indian Ministry of Commerce & Industry, 2004). The cement plants can
be grouped into 12 general clusters serving specific areas of India.
Historically, cement production in India grew at an average annual rate of 8.1%
between 1981 and 2003. Despite some significant single-year jumps, such as the
11.4% growth that was experience between 2001 and 2002, annual growth since 1990
was 7.5% per year and since 2000 was 6.2% per year (India Cements Ltd., n.d.;
UNESCAP, 2004).
The Indian Planning Commission’s Working Group on Cement Industry predicts
cement production in India to grow at a rate of 10% during the tenth five year plan
(2002-2007) (Indian Ministry of Commerce & Industry, 2004). The India cement
industry itself projects a growth rate of 8% to 10% over the 2003 to 2007 period (India
Cements Ltd., n.d.).1
Growth of 8% per year from 2003 to 2020 would result in cement production of 425
million metric tons in 2020; 10% growth would lead to production of 580 million
metric tons that year. China, the world’s largest producer of cement, has seen
sustained cement production average annual growth of 10% since 1980 (van Oss,
2004), mostly due to the enormous infrastructure development that country has
experience over this period.
Similarly, India has plans to lay 13,000 kilometers of roads for the Golden
Quadrilateral and North South East West projects, as well as to use cement for the
Rural Road Scheme, rail projects, construction of power plants, coastal ports, rural
housing, etc. (India Cements Ltd., n.d.; Sethi, 2004).
In addition, it is reported that almost 50 million homes and 24,500 kilometers of new
roads are currently needed and over 22,000 kilometers of single-lane highways need to
be widened, 2000 kilometers of expressway needs to be constructed and 635 bridges
need to be constructed or repaired (Sharma, 2004).
India’s 2003 per capita cement production of 0.1 tonne/capita is significantly below
the world average of 0.3 tonne/capita and China’s production of 0.58 tonnes/capita
(van Oss, 2004; World Bank, 2004). If India’s per capita production increases to
world average levels by 2020, then – based on the United Nation’s medium variant
population projection – total cement production would increase to 390 million metric
tonnes (United Nations, 2003). If India’s per capita production increases to China’s
current level then total cement production in India in 2020 would rise to 765 million
metric tonnes.
India’s overall cement production capacity was nearly 460 million tonnes as of FY18
and consumption has increased by 5 per cent in the FY19 due to the high growth in
housing segment and higher infrastructure spending. India’s cement production
capacity is expected to reach 550 million tonnes by 2025. India is the second largest
cement producer in the world and accounts for over 8 per cent of the global installed
capacity, as of 2018.
Of the total capacity, 98 per cent lies with the private sector and the rest with public
sector. The top 20 companies accounting for around 70 per cent of the total
production, 210 large cement plants account for a cumulative installed capacity of
over 410 million tonnes, while over 350 mini cement plants have an estimated
production capacity of nearly 11.10 million tonnes. Of the total 210 large cement

1 Note that the Planning Commission states that its projected 10% growth will result in “creation of additional capacity of 40-
62 million tonnes” (Indian Ministry of Commerce & Industry, 2004), which would be 159 to 181 million tonnes in 2007, while
we calculate that a 10% growth rate will result in production of 225 million tonnes that year.
plants in India, 77 are situated in the states of Andhra Pradesh, Rajasthan & Tamil
Nadu.
India's cement demand is expected to rise 8 per cent in FY20, according to rating
agency ICRA. Initiative to build 100 smart cities and boost to affordable housing
projects to give a further stimulus 18-20 million tonnes per annum (MTPA) will be
driven for the growth of domestic cement demand during FY20. High cement demand
to be driven by government’s focus on infrastructure and housing for all by 2022.
The North-East, which is witnessing a construction boom, offers attractive investment
opportunities. Opportunities are available in areas such as housing, dedicated freight
corridors, ports and other infrastructure projects.
Robust investments are being made by the existing players to expand their capacity .
FDI inflow in industry related to manufacturing of Cement & Gypsum products
reached US$ 5.28 billion between April 2000 and March 2019. As of December
2018, Raysut Cement Company is planning to invest US$ 700 million in India by
2022.
The advantages can be seen as follows, Oligopoly market, where large players have
partial pricing control. Low threat from substitutes. Per capita cement consumption at
210 kg is currently the lowest among developing countries while the world average is
580 kg. Long-term cement demand growth rate is estimated at 1.2 times of GDP
growth rate.

MARKET OVERVIEW
 India - world’s 2nd largest cement market, both in production and consumption.
 Supported by high level of activity going on in real estate and high government
spending on smart cities and urban infrastructure.

 Cement production capacity of 502 MTPA as of 2018.

 Capacity addition of 20 million tonnes per annum (MTPA) is expected in FY19-
FY21.

 The outlook for domestic cement sector is stable for October 2018 to March 2019
as overall demand conditions remain steady.

 As of June’19, the production of cement stood at 28.3 million tonnes.

India's cement production is expected to rise between

-7 per cent
5 in FY20, backed by
demands in roads, urban infrastructure and commercial real estate.

 Cement production is expected to grow to 316 million tonnes

-19. Itinreached
2018
304.20million tonnes between April -February
2018 2019.
 Sales of cemen
t in India grew at 13.6 per cent-on
year
-year to 275.7 million tonnes
during April 2018
- January 2019.

EXPORT AND IMPORT OF CEMENT

India’s exports of cement, clinker and asbestos cement increased at CAGR of 10.54
INSTALLED CAPACITY
per cent between FY12ANDtoKEY
-FY19 MARKETS
reach IN EACH
US$ 484.24 OF THE
million. GEOGRAPHIC
During REGIONS
the same period
imports of cement, clinker and asbestos cement increased at a CAGR of 7.99 per cent
to US$ 158.
49 million in FY19.

 The country’s top export destinations for cement, clinker and asbestos cement in
FY18 were Nepal, Sri Lanka, USA, Maldives and UK.

 The country’s top five import sources for cement, clinker and asbestos cement in
FY18 were Pakistan
, Bangladesh, Japan, Vietnam and Thailand.
STRATEGIES ADOPTED

1. Presence of small & mid-size cement players across regions is increasing,

which helps to diminish market concentration of industry leaders
2. A large number of foreign players have also entered the market owing to the
profit margins, constant demand & right valuation.
3. India has joined hands with Switzerland to reduce energy consumption &
develop newer methods in the country for more efficient cement production,
which would help India meet its rising demand for cement in the infrastructure
sector.
4. In Union Budget 2019-20, the Government of India has extended benefits
under Section 80 - IBA of the Income Tax Act till March 31, 2019 to promote
affordable housing in India.
5. Housing and real estate sectors accounts for nearly 65 per cent of the total
cement consumption in India.
6. The Government of India has decided to adopt cement instead of bitumen for
the construction of all new road projects on the grounds that cement is more
durable & cheaper to maintain than bitumen in the long run. Companies are
trying to develop a niche market for RMC (Ready Mix Concrete)
7. In November 2018, Ultratech Cement received approval for its purchase of
Binani Cement for a consideration of Rs 7,950 crore (US$ 1.10 billion). In
October 2018, India Cements entered into a share purchase agreement worth Rs
182.89 crore (US$ 26.06 million) for acquisition of Springway Mining. The
acquisition will help the company to enter the Uttar Pradesh market and other
markets in North India.

SUCCESSFUL USE OF ALTERNATE FUELS IN CEMENT PRODUCTION

GROWTH DRIVERS AND OPPORTUNITIES

India's cement demand is expected to rise 8 per cent in FY20, according torating
agency ICRA.
“The demand of Cement industry is expected to achieve 550-600 million tonnes per
annum constantly by 2025 because of the expanding requests of different divisions i.e.
housing, commercial construction and industrial construction.”
Government initiatives like Housing for All to push demand in the sector. Real Estate
market in India is expected to reach US$ 1 trillion by 2023 from US$ 120 billion in
2017. Strong growth in rural housing and low-cost housing to amplify demand.
As per Union Budget 2019-20, Government is expected to upgrade 1,25,000 kms of
road length over the next five years. Projects like Dedicated Freight Corridors and
ports under development. Metro rail projects already underway in most major cities.
Government of India’s push with Smart Cities Mission and AMRUT.
Strong economic growth is expected to lead to growth of the industrial sector and in
turn increase in demand in the long run.
POLICIES AND INITIATIVES
The Union Budget has allocated Rs 139 billion (US$ 1.93 billion) for Urban
Rejuvenation Mission: AMRUT and Smart Cities Mission. Government’s
infrastructure push combined with housing for all, Smart Cities Mission and Swachh
Bharat Abhiyan is going to boost cement demand in the country.
To enhance the source of capital for infrastructure financing, Credit Guarantee
Enhancement Corporation for which regulations have been notified by the RBI, will
be set up in 2019-20. Union Budget 2019-20. In Union Budget 2019-20, the
Government of India has extended benefits under Section 80 - IBA of the Income Tax
Act till March 31, 2019 to promote affordable housing in India Enhanced interest
deduction up to Rs 350,000 (US$ 5,250) for purchase of an affordable house. An
outlay of Rs 68.53 crore (US$ 949.83 million) has been allotted under Pradhan Mantri
Awas Yojana – Gramin in Union Budget 2019-20. Gramin (PMAY-G) aims to
achieve the objective of “Housing for All” by 2022. A total of 1.54 crore rural homes
have been completed in the last five years. In the second phase of PMAY-G, during
2019-20 to 2021-22. As of October 2018, the Government of India has auctioned 23
limestone blocks and 42 more limestone blocks are expected to be auctioned by March
2019.
INVESTMENT SCENARIO

Emami Cement : The company is aiming to increase its production capacity to 6

MTPA by 2018-19 and market share to 10 per cent by 2019. In October 2018, the
company files draft papers for a US$ 135 million Initial Public Offer (IPO). The
company is setting up its Kalinganagar manufacturing plant and expects operations to
start by April 2019. It also acquired the Bhabua manufacturing plant in September
2018.
Shree Cement : The company has undertaken two greenfield projects in West Bengal
and Odisha to increase its presence in eastern India. These projects will attract an
investment of US$ 78 million and will be commissioned by late 2018.
Ambuja Cement : As of March 2018, the company is going to invest Rs 1,391 crore
(US$ 214.86 million) for setting up a 1.7 MTPA greenfield clinker plant in Rajasthan
which is expected to be operational by second half of 2020. A majority of land is
already in possession of the company and the rest is in advanced stages of acquisition.
Ultratech Cement : During 2017-18, Ultratech commissioned a greenfield clinker
plant with a capacity of 2.5 MTPA and a cement grinding facility with 1.75 MTPA
capacity in Dhar, Madhya Pradesh. The company is expecting to complete a 1.75
MTPA cement grinding facility and a 13 MW waste heat recovery system by
September 2018 at the same location. The company is planning to build a US$ 287
million plant in Rajasthan. The plant will have a capacity of 3.5 million tonnes per
annum and is expected to commence operations by June 2020. The company has
received approval for a US$ 9.04 million opencast limestone mine project in Gujarat.
The project has a capacity of 2.07 MTPA of limestone which will be used to support a
proposed cement plant in Bhavnagar district.
Ramco Cements : The company will invest Rs 15 billion (US$ 213.74 million) to set
up a 3.15 MTPA green field cement plant in Andhra Pradesh. With this investment,
the company will become the largest cement manufacturer in Andhra Pradesh.
ACC : ACC will upgrade and expand its Jamul unit in Chattisgarh & its grinding unit
in Jharkhand. This will increase ACC’s capacity to 38 MTPA from 30 MTPA in a
phased manner by 2016 & 55 MTPA in 2020.
Dalmia Cement : As of November 2018, the company plans to invest Rs 25 billion
(US$ 356.23 million) to set up manufacturing plants in Rajgangpur and Cuttack in
Odisha. It is the preferred bidder for one block of Limestone (Kesla II) in Raipur,
with reserves of 215 million tonnes. The deal is expected to generate cumulative
revenues worth US$ 1.76 billion for the state government.
JK Cement : JK Cement is planning to invest Rs 1,700 crore (US$ 235.6 million) by
2020 to increase its production capacity to 15 million tonnes from 10 million tonnes at
current, and also entering into new markets like Gujarat and Uttar Pradesh. The
company is aiming to further increase its production capacity to reach 18 MTPA by
2022.

WATER MANAGEMENT PROJECTS.

Water is easy to take for granted. It falls from the sky, and, though it’s vital, we
sometimes treat it as if it’s worthless. How often have you seen sprinklers running in
the rain Yet the prospect of shortages in the years ahead could make water a precious
commodity. That represents an opportunity for investors.
A small group of traditional mutual funds and exchange-traded funds already invest in
it, mainly in companies that contribute to the delivery, testing and cleaning of potable
water. Those companies stand to grow as governments around the globe strive to stem
the expected water shortfalls.

“Water scarcity is a global phenomenon,” said Andreas M. Fruschki, portfolio

manager of the AllianzGI Global Water Fund. “And it’s most pronounced in regions
with the highest population growth,” like the Indian subcontinent and the Middle East.
Population growth, climate change and pollution are disrupting the world’s freshwater
supplies. The United Nations Environment Program has predicted that half the globe’s
population could face severe water stress by 2030. Annual expenditures of $200
billion, up from a historical average of about $40 billion to $45 billion, are needed
now to keep spigots running, the United Nations said in a 2016 report.
Even developed countries face rising costs to deliver water, because water is heavy
and hard to move long distances. “Rain in New York doesn’t help Southern
California,” Fruschki said. On top of this, antiquated water infrastructure needs to be
replaced, he said. That’s leading to water-main breaks and the loss of 2 trillion gallons
of drinking water a year in the United States, according to the American Society of
Civil Engineers’ 2017 Infrastructure Report Card.

The 35 companies held by the AllianzGI fund provide products or services to help
overcome water scarcity and remedy infrastructure shortcomings, Fruschki said. The
fund’s largest holding, American Water Works, is a utility that operates in 16 states,
including New York and New Jersey. Another top holding, Xylem, supplies a spate of
water technologies as diverse as pumps and smart meters.

A quirk of this sector is that, though water is a commodity, it can’t be bought directly
in the way many other commodities can be. “It’s not a tradable good like oil,”
Fruschki said. Australia has a water market, called Waterfind. But in the United
States, betting on the price of water requires buying land that has water rights
associated with it. Harvard University’s endowment, for example, has bought up
California vineyards and thus acquired control of their water rights.

Created in 2008, the AllianzGI fund returned an annual average of 9.83% over the 10
years that ended in June, compared with 5.37% for its average Morningstar peer. The
fund is unusual in this niche in that it’s actively managed. The bulk of the water
mutual funds and ETFs available to retail investors track indexes and are not actively
managed.

Take the Calvert Global Water Fund. It’s built upon an index that the fund’s sponsor,
Calvert Research and Management, created to include not just companies that help
supply potable water but also big users with exemplary practices, said Jade S. Huang,
a vice president and environmental, social and governance portfolio manager for
Calvert. While the fund owns American Water Works and Xylem, it also counts
Taiwan Semiconductor Manufacturing among its 111 holdings.

Semiconductor plants gulp down huge quantities of water, and, though Taiwan
receives plenty of rainfall, it has little ability to store it. Huang said Calvert views
smart water handling as prudent risk management for chipmakers like Taiwan
Semiconductor. “It puts them in a better position competitively, and they’re a market
leader in the semiconductor space.”
For water ETFs, Invesco is the dominant player, with three offerings. Two of its funds
— Invesco Water Resources ETF and Invesco Global Water ETF — are constructed
around Nasdaq indexes. The Water Resources holdings are focused on the United
States, while those of Global Water are spread around the world, though companies
listed in the United States account for about half its assets. Water Resources returned
an annual average of 9.89% over the decade that ended in June, while Global Water
return.

One way water investments differ from those in some other sectors is their greater
exposure to regulatory and political risk. In the developed world, water supplies are
often closely regulated, and in the United States, governments are both big customers
and potential competitors.

That’s why a fund’s diversification, especially its country diversification, matters,

Bloom said. Even if the United States were to tighten water regulation, other countries
wouldn’t necessarily follow. Matthew C. Sheldon, senior portfolio manager for water
strategy at KBI Global Investors in Boston said, “different investors come to water
from different angles. Some are looking to dilute their other natural-resource
exposures. Others are looking for an infrastructure play. Some have a strong interest in
environmental, social and governance investing. Some just want a diversifier.”

An internal analysis conducted by KBI found that adding a water ETF to an already
diverse portfolio both increased its overall return and reduced its risk.

But water wagers create ethical quandaries for some investors, said Monika J.
Freyman, director for investor engagement, water, at Ceres, a Boston nonprofit.
“Water’s needed for life itself,” she said. “So if you’re jacking up rates, you are going
to run into social justice issues. Do you turn off a poor family’s water?”
Some investors shy from the sector because “a lot of people see publicly traded water
utilities as water privatizers,” said Julie K. Gorte, senior vice president for sustainable
investing at Impax Asset Management. Water, in this view, should be publicly owned
and controlled to ensure that everyone has access to it. In reality, “municipalities often
contract with water utilities” and regulate their service provision, Gorte said.
Robert Glennon, a water-law expert at the University of Arizona’s Rogers College of
Law, said some of the distrust of private-sector control of water supplies may stem
from misunderstandings of what customers pay for and where most fresh water goes.
“Water may be a gift from God, but God doesn’t give us pipes, and pipes are
expensive,” he said.

Household water accounts for only a small portion of water consumption — in the
United States, about 7%, Glennon said. The rest is used by farms and industry. And
they have little incentive to use it prudently because nearly everyone in the United
States pays little for water, he said.

“Our water supply is like a giant milkshake, and each diversion is a straw in the
glass,” he said. “People have a sense of our water supply as infinite, but in reality, it’s
finite and exhaustible.”

Karnataka is one of the top ten states in India by gross domestic product and has
achieved an average gross domestic product growth rate of over 8% per annum since
FY2005. The state’s rapid economic growth is from the tertiary sector, which is
centered around Bangalore in the southern part of Karnataka. Economic activities are
heavily concentrated in Bangalore, with the city contributing more than 30% to the
state gross domestic product. Karnataka’s urbanization rate of 38% makes it the fourth
most urbanized state in India, which has a national urbanization rate of 28%.
Bangalore, the single largest urban center in the state, houses almost 90% of the
state’s urban population. As urbanization in the state continues to grow rapidly, by
2030 half of the state population will live in urban areas. This will put severe
pressures on Bangalore as there are limited alternative urban locations that offer
competitive basic urban services for businesses and residents.

KARNATAKA INTEGRATED URBAN WATER MANAGEMENT INVESTMENT PROGRAM

Karnataka is one of the top ten states in India by gross domestic product and has
achieved an average gross domestic product growth rate of over 8% per annum since
FY2005. The state’s rapid economic growth is from the tertiary sector, which is
centred around Bangalore in the southern part of Karnataka. Economic activities are
heavily concentrated in Bangalore, with the city contributing more than 30% to the
state gross domestic product. Karnataka’s urbanization rate of 38% makes it the fourth
most urbanized state in India, which has a national urbanization rate of 28%.
Bangalore, the single largest urban center in the state, houses almost 90% of the
state’s urban population. As urbanization in the state continues to grow rapidly, by
2030 half of the state population will live in urban areas. This will put severe
pressures on Bangalore as there are limited alternative urban locations that offer
competitive basic urban services for businesses and residents.

Recognizing the long-term impact from the uneven economic development in the
state, the Government of Karnataka has initiated many urban infrastructure
development projects outside Bangalore, in particular in North Karnataka, through
various programs with national and international support, including the Karnataka
Urban Infrastructure Development Project, the Karnataka Urban Development and
Coastal Environment Management Project, and the North Karnataka Urban Sector
Improvement Program financed by the Asian Development Bank (ADB). The
Karnataka Integrated Urban Water Management Investment Program will further
assist the government to realize its infrastructure needs through an integrated approach
to water resource management and water supply and sewerage service delivery.

The government envisages investing approximately $2 billion by 2030 to establish and

improve basic water supply and sewerage infrastructure and services, reduce
nonrevenue water, increase service delivery and coverage, treat wastewater to national
standards, and promote commercial use of recycled wastewater in the state. The
infrastructure investment plan is consistent with the national urban development
framework and urban reform initiatives. The multitranche financing facility modality
is the most suitable modality to support the state’s longterm sector development
agenda.

The Karnataka Integrated Urban Water Management Investment Program is based on

sound economic rationale as its interventions are aimed to improve the provision of
basic civic services, which are a public good. Under the program, the government
interventions are limited to basic urban services where (i) there is a natural monopoly
and (ii) integrated and coordinated management by the government is required due to
interdependence of water and sanitation sectors, and externalities. As a result of
improved public services, positive externalities in public health, human capital
development, environmental protection, and resource management will be created and
better managed. Through enhanced institutional capacity, the urban local bodies
(ULBs) will also be able to execute their constitutional mandate more efficiently.

The goals of the government for the water and sanitation sector are (i) 100% coverage
of 24-hour water supply through metered connections and (ii) 100% sewerage
coverage with 100% sewage treatment. The current service level in the state does not
meet the goals of the government, which has prepared a 2 sector road map in line with
its integrated water resources management vision to promote coordinated planning,
development, and management of water resources that will enhance economic and
social benefits without compromising environmental sustainability.

The sector road map identified the current service levels and service gaps as well as
the physical and nonphysical investments required to bridge these gaps by 2020. Of
the total infrastructure investment plan of $2 billion, less than 33% of the funds are
currently committed. The Karnataka Integrated Urban Water Management Investment
Program will provide $227 million to finance investment plan and project 1 of the
program will improve service levels at three ULBs in the Upper Tungabhadra
subbasin (Byadagi, Davanagere and Harihar).

The government has prepared an investment program for 2013– 2030 to enable the
implementation of the sector road map. The investment program associated with the
infrastructure investment plan includes short- and medium-term financing
requirements and investment activities in the water and sanitation sector for 213 ULBs
across the state.

The 74th amendment to the Constitution reaffirmed the democratic local governance
structure by creating responsibilities and management authorities at the local level to
accelerate the pace of urban sector reforms in India. The state government recognizes
the critical contribution from the urban sector to economic growth and poverty
reduction as well as the importance of ULBs in executing the reform agendas. To
achieve operational sustainability, various national and state policies recommended
the introduction of user charges: (i) The National Water Policy (2002) suggests
recovery of at least the operation and maintenance (O&M) cost of initial service
provision as well as a part of the subsequent capital costs, linking the user charges
with the quality of service provided. (ii) The National Urban Sanitation Policy (2008)
emphasizes O&M cost recovery through the introduction of user charge to ensure
accountability and financial sustainability. (iii) The Ministry of Urban Development
issued the Handbook of Service Level Benchmark (2008), which encourages user
charges to achieve 100% O&M cost recovery and 90% collection efficiency. (iv) The
National Water Mission (2009) of the Government of India calls for appropriate
pricing based on cost recovery principle. (v) Jawaharlal Nehru National Urban
Renewal Mission also encourages O&M cost recovery at the initial state and gradual
full cost recovery ultimately leading to self-sustaining delivery. (vi) The National
Water Policy (2013), focuses on the principle of integrated water resources
management in improving water use efficiency through planning, development, and
management of water resources. Water scarcity should be addressed through
appropriate pricing of water supply and sewerage management by a water regulatory
authority in each state. (vii) The Government of Karnataka has taken up initiatives
under the State Urban Agenda for Karnataka to advance priority projects and
governance reforms. (viii) The State Water Policy (2002) and the Karnataka Urban
Drinking Water and Sanitation Policy (2002) set the following principles on water
tariff setting: (a) establishment of an appropriate cost recovery mechanism through
tariff to recover O&M costs, debt service, and a reasonable return on capital; (b)
achievement of 100% metering and volumetric pricing based on the long-run marginal
costs; (c) structuring of tariffs to discourage excessive consumption and water
wastage; and (d) ensuring a lifeline supply to the poor.

In Karnataka, many ULBs have adopted flat water tariffs and some, including Bellary
and Ranebennur, have adopted flat sewerage tariffs. In Bangalore, a sewerage tariff is
levied as a surcharge to the water tariff. The three ULBs under project 1 have recently
increased their water tariffs in accordance with the 2011 government order. These
ULBs are in the process of adopting the sewerage tariff rates endorsed by the state.
The Karnataka Integrated Urban Water Management Investment Program will require
the ULBs undertaking water supply subprojects to move from flat water tariffs to
volumetric water tariffs. The ULBs undertaking sewerage subprojects are also
required to introduce sewer tariffs at levels that will allow full recovery of O&M
costs.
The economic risks include the uncertainty in introducing and enforcing volumetric
water tariffs and flat sewerage tariffs since the ULBs responsible for implementing
these tariffs have been historically reluctant to increase user charges. The initiative by
the Government of Karnataka to combine reform effectiveness with resource
allocation will incentivize the ULBs to adopt recommended tariff rates. As the sewer
subprojects will not recover the O&M costs in the first few years, the ULBs will need
to better manage their municipal resources to support the operation of the sewer
system. The program has included a capacity strengthening component to assist the
ULBs in assessing the current financial status and initiating measures to stabilize and
enhance both tax and non-tax revenues.
The state government, through its nodal agency the Karnataka Urban Infrastructure
Development and Finance Corporation (KUIDFC) acting as the executing agency, is
fully capable of executing the investment program. The KUIDFC has implemented
and is still handling several externally aided projects, including the first three tranches
under the North Karnataka Urban Sector Investment Program, the Karnataka Urban
Development and Coastal Environmental Management Project, two World Bank
projects in the urban sector, and other national schemes. The annual operating cash
flow towards the implementation of these externally aided projects was approximately
$78 million for FY2012 and $58 million for FY2011. The KUIDFC has developed
sufficient capacity in project appraisal, project management, procurement, safeguards,
and project financial management and reporting. Government Commitment. The
government commitment to support urban development is firm, as demonstrated by
increased budgetary allocation to the sector. From FY2008 to FY2010, state
development expenditures on water, sanitation, and urban development more than
doubled. When combined, water and urban development comprised almost 5% of total
development expenditures of the state for FY2010, up from 2.9% in FY2008. For
FY2011, the government projected an annual increase of 50% in development
expenditures in the water and sanitation sector. Coordination with Foreign Aid.
The $227 million provided by the program is approximately 11% of the infrastructure
investment plan for the sector. An additional $518 million need to be identified to
fully execute the plan, potentially from state or external aid agencies. Effective
coordination between ADB and other foreign aid agencies will ensure efficient use of
external funds. Regardless of whether a joint or parallel financing mechanism will be
employed, the KUIDFC would be the single focal point in managing externally aided
projects and ensuring the most efficient and prioritized use of funds.
The introduction of and periodic adjustment to the volumetric water tariff rates as well
as the introduction of flat sewer tariff rate are conditions to be implemented by the
Government of Karnataka. Economic Analysis of Subprojects. An economic analysis
has been conducted for all six subprojects under project 1 in accordance with ADB’s
Guidelines for the Economic Analysis of Projects (1997) and Guidelines for the
Economic Analysis of Water Supply Projects (1998). 15. Demand and Rationale.
Water supply services for all three ULBs are inadequate in terms of the supply
quantity, service coverage, and service hours. The average supply quantity ranges
from 56 to 80 liters per capita per day, the service coverage is under 50%, and the
average service hours for most areas are under 2 hours a day. After implementation of
project 1, the supply quantity will increase to 135 liters per capita per day, with 90%
service coverage and 24-hour supply. Except for some parts of Davangere, there are
no piped sewer systems in all three ULBs.
On average, less than 30% of the population relies on septic tanks while many have to
resort to open defecation. Sewerage is discharged directly into open drainage,
polluting water courses and underground aquifers. After implementation of project 1,
80% of the population will have access to the sewerage system, centrally treated, and
discharged meeting national discharge requirements. 16. The economic analysis is
based on the following assumptions: (i) The analysis is based on domestic numeraire
in January 2014 constant prices. (ii) The population growth in each town was
projected based on historical trends. (iii) Subprojects were analyzed over 20 years,
excluding the 4 years of project implementation. Assets established by the subprojects
were assumed to have a useful life of 30 years. Salvage values were assumed at the
end of the analysis period. (iv) The economic costs included base costs and physical
contingency and excluded price contingency, financing charges, and taxes and duties.
The shadow wage factor of 0.75 and the shadow exchange factor of 1.03 were applied
to convert financial values to economic values. (v) The economic benefits from the
water supply subprojects included time savings in procuring water and household
expenditure savings on the purchase, installation, and maintenance of storage tanks as
well as the procurement of bottled water. (vi) The economic benefits from the
sewerage subprojects included medical expenditure savings; household expenditure
savings on the purchase, installation, and maintenance of septic tanks; and savings in
productivity loss due to water borne diseases. Based on the above assumptions, the
economic internal rate of return (EIRR) was calculated and compared to the economic
opportunity cost of capital estimated at 12%.
NAL SE JAL SCHEME

India’s new infrastructure frontier isn’t highways, airports or smart cities. It’s water.
After all, the massive investment involved in planning and rolling out the
government’s promise to deliver piped water to all rural homes by 2024, amid
shortages, is the pre-eminent challenge before the country. The natural resource
finds a mention in the Union budget, in NITI Aayog’s dire predictions of metros
running dry and, now, in the calculations of private sector infrastructure players
looking to make a buck.
A report by Bank of America Merrill Lynch, released on Tuesday, estimates that India
needs to pump in $270 billion (about ₹18.5 trillion) over the next 5-15 years to meet
its ambitions of piped water supply to all homes by 2024, cleaning the Ganga,
interlinking rivers to redirect water to water-scarce regions and irrigation projects.
Brokerage firm JM Financial says the government’s Nal Se Jal scheme for piped water
supply alone will need ₹6.3 trillion in investment.
In her budget speech, finance minister Nirmala Sitharaman said the Jal Shakti
Ministry—which will combine the operations of the erstwhile water resources, river
development and Ganga rejuvenation ministries—will work with states to ensure
every rural house gets piped water by 2024.
For context, only 18.3% of rural households have piped water supply today. The
budget— ₹9,150.36 crore for the National Rural Drinking Water Programme—is a
69% increase in allocation from the previous year.
The investment isn’t going to come without the private sector pitching in. In a July 14
interview to the Indian Express, Jal Shakti minister Gajendra Singh Shekhawat said
the government is examining the public-private partnership model for water infra
projects. This includes BOT (build, operate and transfer), DBOT (design, build,
operate and transfer) and the hybrid annuity model (HAM), the last of which
successfully brought in private capital and ramped up the speed at which highways
were built in India.
Sandeep Garg, managing director and CEO, Welspun Enterprises, said in an interview
the highway developer has started bidding for water projects as well.
“We’re looking at projects in sewage treatment, bulk water transmission and seawater
desalination, either under the HAM or EPC model. We have already participated in
bids for projects in sewage treatment and lift irrigation and we expect to win the first
project in about three months."

“While water is a state subject, there is a very strong presence of the Central
government in Namami Gange and the river interlinking projects," an infrastructure
consultant told Mint on the condition of anonymity. “With 13 large projects on the
anvil, river interlinking is going to be a huge opportunity but there is no clarity as of
now on how this is going to be implemented. If these projects are to happen, river
interlinking alone will need lakhs of crores in investment.

The smallcap stock has risen 76 percent in 2019 alone when benchmark Nifty50 lost
0.4 percent. The stock hit its 52-week high of Rs 794 per share on BSE on July 22,
2019, and the current market cap of the company stands at Rs 980 crore.
Jhunjhunwala held 8 lakh shares of Ion Exchange as of June 2019, taking his holding
to 5.46 percent. He has more than doubled his stake in the company from 2.5 percent
in December 2007.
The company believes the water and wastewater treatment market will continue to
grow on account of an increase in demand due to rapid urbanization, curbs on water
pollution and implementation of stringent effluent disposal regulations.
The government’s ‘Nal se Jal’ scheme will also increase investment in the water and
sanitation sector in the next five years.
During the financial year ended March 31, 2019, the net profit of Ion Exchange rose to
Rs 66.59 crore as compared to Rs 47.75 crore a year ago, showing a rise of 39.4
percent. The turnover of the company increased to Rs 1,102 crore as compared to Rs
994 crore the previous year.
According to JM Financial Institutional Equities, the 'Nal se Jal' scheme, which aims
to provide piped water connection to every household by 2024, will likely lead to a
massive jump in investment in water and sanitation.
The company is a leader in the Indian water treatment industry and offers total water
management solutions for industry, homes, and communities.

AVIATION SECTOR
THE INDIAN AVIATION SECTOR

Indian Aviation Industry is one of the fastest growing airline industries in the world.
The history of Indian Aviation Industry started in December 1912 with its first
domestic air between Karachi and Delhi. It was opened by the Indian Air Services in
collaboration with the UK based Imperial Airways as an extension of London-Karachi
flight of the Imperial Airways. Tata Sons Ltd., the first Indian airline, started a regular
airmail service between Karachi and Madras three years later without any backing
from the Indian government.
During the period of independence, 9 air transport companies were carrying both air
cargo and passengers in the Indian Territory. In 1948, the Indian Government and Air
India set up a joint sector company, Air India International to further strengthen the
Aviation Industry of India. As part of nationalization in 1953 of Indian Airlines (IA)
brought the domestic civil aviation sector under the purview of Indian Government.
Later till the mid 1990's government airlines dominated Indian aviation industry.
When the government adopted the Open-sky policy in 1990 and other liberalization
policies the Indian Aviation Indian made underwent a rapid and dramatic
transformation.
By the year 2000 several private airlines have entered into the aviation business in
succession and many more were about to enter into the arena. Indian aviation industry
today is dominated by private airlines and low Airlines, GoAir, and SpiceJet, etc. And
Indian Airlines, the giant of Indian air travel industry, gradually lost its market share
to these private airlines. According to the report of CAPA, these budget carriers are
likely to double their market share by 2010 -- one of the highest in the world.
Indian Aviation Industry has been one of the fastest aviation industries in the world
with private airlines accounting for more than 75 % of the sector of the domestic
aviation market. With a compound annual growth rate (CAGR) of 18 % and 454
airports and airstrips in place in the country, of which 16 are designated as
international airports, it has been stated that the aviation sector will witness revival by
2011. In 2009 with increase in traffic movement and increase in revenues by almost
US$ 21.4 million, the Airports Authority of India seems set to accrue better margins in
2009 estimates released by the Ministry of Civil Aviation. This is being primarily
attributed because o of revenue from Delhi International Airport Limited (DIAL) and
Mumbai International Airport Limited (MIAL). Passengers carried by Indian domestic
airlines from January February 2010 stood at 8,056,000 as against 6,761,000 in the
corresponding period of 2009-a growth of 19.2 %, according to a report released by
the Ministry of Civil Aviation.
The Indian aviation sector can be broadly divided into the following
main categories:
1. Scheduled air transport service includes domestic and international airlines.
2. Non-scheduled air transport service consists of charter operators and air taxi
operators.
3. Air cargo service, which includes air transportation of cargo and mail.
Scheduled air transport service: It is an air transport service undertaken between two
or more places and operated according to a published timetable. It includes: Domestic
airlines, which provide scheduled flights within India and to select international
destinations. Air Deccan, Spice Jet, and IndiGo are some of the domestic players in
the industry. International airlines operate from scheduled international air services to
and from India. Non-scheduled air transport service: It is an air transport service other
than the scheduled one and may be on charter basis and/or non-scheduled basis. The
operator is not permitted to publish time schedule and issue tickets to passengers. Air
cargo services: It is an air transportation of cargo and mail. It may be on scheduled or
non-scheduled basis. These operations are to destinations within India. For operation
outside India, the operator has to take specific permission of Directorate General of
Civil Aviation demonstrating his capacity for conducting such an operation. India is
one of the fastest growing aviation markets in the world. A total of 127 airports in the
country, which include 13 international airports, 7 custom airports, 80 domestic
airports and 28 civil enclaves are managed by The Airport Authority of India (AAI).
There are about 450 airports and 1091 registered aircrafts in India today.
The airline industry is important for the global economy. Airports, in particular hub
airports, are the backbone of air transportation. Transportation plays a vital role in the
changing global economy, linking people and places, facilitating trade and tourism,
and encouraging economic competition and specialization. The aviation system offers
one of the most significant engines for national economic growth. If managed well,
this economic advantage will become ever more important as there is continued
movement toward a global economy dominated by services and lighter, high-value
manufacturing The airport forms a vital part in the aviation system, because, at this
point in the system, the mode of transport changes from the air mode to land mode.
Therefore, it is the point of interaction of the three major components of the air
transport system: The airport (with related air traffic control), the airline and the user.
Aviation is a spatial activity concerned with supplying a transport service: a derived
demand arising from the need to match the production of goods and service with their
points of consumption.
is a good example of rapid technological change and the airports that serve it are key
elements in its development. Aviation is a challenging field in the age when
information becomes readily available arid concepts and techniques to use it
proliferate. In particular, we are planning in an era when what happens tomorrow
needs not resemble today. Yet we often have only today upon which to build our
models, and so have to make assumptions that are vulnerable Air travel is growing at a
rate that outstrips the capacity of the airport and air traffic control system. Resulting in
mounting congestion and delay. The consequences for the air transport industry and
the travelling public are higher cost, greater inconvenience, declining quality of
service, and possibly diminished safety. The adequacy of airport and airway
infrastructure to serve future air travel demand is paramount. This infrastructure needs
to be properly conceived, planned, expanded, and managed, so as to support a volume
of traffic far greater than we have today. If not, congestion and delay in the aviation
system will be a constraint on growth that will profoundly affect the society in the
next millennium.
ROLE OF AIRPORT INFRASTRUCTURE IN NATIONAL ECONOMY

Airports also represent a country's window on the world. Passengers form their first
impressions about a nation from the state of its airports.
They can be effectively used as symbols of national pride, if we pay sufficient
attention to their quality and maintenance. In many remote, hilly and inaccessible
areas of the country, air transport is the quickest and sometimes the only mode of
travel available. This is especially true of sensitive regions on the borders with our
neighbours in the west, north and north-east.
Airports need to be integrated with other modes of transport like Railways and
Highways, enabling seamless transportation to all parts of the country.
OBJECTIVES OF POLICY

1. To provide a boost to international trade and tourism and enhance the country's
image in the community of nations;
2. To provide airport capacity ahead of demand, in order to handle an increasing
volume of air traffic and to garner the maximum share of traffic in the region;
3. To enhance airport facilities to make the airport user friendly and achieve
higher level of customer satisfaction.
4. To ensure total safety and security of aircraft operations by the introduction of
state-of-art air traffic, security and related services;
5. To provide multi-modal linkages;
6. To provide a market orientation to the present structure, bridge the resource
gap and encourage greater efficiency and enterprise in the operation of airports,
through the introduction of private capital and management skills;
7. To foster the development of a strong airport infrastructure, maintaining a
balance between the need for economic viability and the objective of equitable
regional dispersal of infrastructural facilities;
8. In the achievement of the above objective, to lay special emphasis on the
development of infrastructure for remote and inaccessible areas, especially the
North East, the hilly and island regions; and
 9. To encourage transparency and clarity in the decision making processes of
Government and its public sector units. Policy has necessarily to change in
response to a rapidly transforming global scenario, although the process of
transformation has to be progressive, orderly and safeguarded. Looking at what
has been achieved in other countries, there is a wide gap which needs to be
bridged first.

THE CHAOS OF THE AVIATION SECTOR

India aviation industry promises huge growth potential due to large and growing
middle class population, favourable demographics, rapid economic growth, higher
disposable incomes, rising aspirations of the middle class, and overall low penetration
levels (less than 3%). While the domestic airlines have not been able to attract foreign
investors (up to 49% FDI is allowed, though foreign airlines are currently not allowed
any stake), foreign airlines may be interested in taking strategic stakes due to their
deeper business understanding, longer investment horizons and overall longer term
commitment towards the global aviation industry. Healthy passenger traffic growth on
account of favourable demographics, rising disposable incomes and low air travel
penetration could attract long-term strategic investments in the sector. There are
challenges: i) aviation money matters is currently not favourable in India resulting in
weak financial performance of airlines and ii) Internationally, too airlines are going
through period of stress which could possibly discourage their investment plans in
newer markets. Besides, foreign carriers already enjoy significant market share of
profitable international routes and have wide access to Indian market through
codesharing arrangements with domestic players. Given these considerations, we
believe, foreign airlines are likely to be more cautious in their investment decisions
and strategies are likely to be long drawn rather than focused on short - term
valuations.
The first commercial flight in India took-off in , 1911, when a French pilot
Monseigneur Piguet flew airmails from Allahabad to Naini, covering a distance of
about 10 km in as many minutes. Tata Services became Tata Airlines and then
AirIndia and spread its wings as Air-India International. The domestic aviation scene,
however, was chaotic. When the American Tenth Air Force in India disposed of its
planes at throwaway prices, 11 domestic airlines sprang up, scrambling for traffic that
could sustain only two or three. In 1953, the government nationalized the airlines,
merged them, and created Indian Airlines. For the next 25 years JRD Tata remained
the chairman of Air-India and a director on the board of Indian Airlines. After JRD
left, voracious unions mushroomed, spawned on the pork barrel jobs created by
politicians. In 1999, A-I had 700 employees per plane; today it has 474 whereas other
airlines have 350. The Indian Aviation Industry has been going through a chaotic
phase over the past several years facing multiple headwinds – high oil prices and
limited pricing power contributed by industry wide over capacity and periods of
subdued demand growth. Over the near term.
The challenges facing the airline operators are related to high debt burden and
liquidity constraints - most operators need significant equity infusion to effect a
meaningful improvement in balance sheet. Improved financial profile would also
allow these players to focus on steps to improve long term viability and brand building
through differentiated customer service. Over the long term the operators need to
focus on improving cost structure, through rationalization at all levels including mix
of fleet and routes, aimed at cost efficiency. At the industry level, long term viability
also requires return of pricing power through better alignment of capacity to the
underlying demand growth Historically, the Indian aviation sector has been a foot-
dragger relative to its growth potential due to unnecessary, government ownership and
regulations of airlines and resulting high cost of air travel. However, this has changed
rapidly over the last decade with the sector showing explosive growth supported by
structural reforms, airport modernizations, entry of private airlines, adoption of low
fare - no frills models and improvement in service standards. Like elsewhere in the
world, air travel is been transformed into a mode of mass transportation and is
gradually shedding its elitist image.
Air India

This is the flag carrier airline of India owned by Air India Limited (AIL), a
Government of India enterprise. The airline operates a fleet of Airbus and Boeing
aircraft serving various domestic and international airports. It is headquartered at the
Indian Airlines House in New Delhi. Air India has two major domestic hubs at Indira
Gandhi International Airport and Chhatrapati Shivaji International Airport, and
secondary hubs at Chennai International Airport and Netaji Subhas Chandra Bose
International Airport, Kolkata. The airline formerly operated a hub at Frankfurt
Airport which was terminated on account of high costs. However, another
international hub is being planned at the Dubai International Airport. Air India was
once the largest operator in the Indian subcontinent with a market share of over 60%.
Indifferent financial performance and service, labor trouble pushed it to fourth place in
India, behind low cost carriers like IndiGo, Spicejet, and its full service rival Jet
Airways. Between September 2007 and May 2011, Air India's domestic market share
declined from 19.2% to 14%, primarily because of stiff competition from private
Indian carriers.[9][10] However, after financial restructuring and enforcement of strict
rules and regulations, the airlines showed signs of turning around. In March 2013, the
airlines posted its first positive EBITDA after almost 6 years.
The airlines bolstered its financial and physical performance with a 44 per cent slash
in its operating losses in 2013-14 and an almost 20 per cent growth in its operating
revenue since the previous financial year.[12] As of January 2014, Air India is the
third largest carrier in India, after IndiGo and Jet Airways with a market share of just
above 19%. The airline was invited to be a part of the Star Alliance in 2007. Air India
completed the merger with Indian Airlines and some part of the agreed upgrades in its
service and membership systems by 2011. In August 2011, Air India's invitation to
join Star Alliance was suspended as a result of its failure to meet the minimum
standards for the membership. However, in October 2011, talks between the airline
and Star Alliance resumed. On 13 December 2013, Star Alliance announced that Air
India and the alliance have resumed the integration process and the airline would join
the alliance in July 2014.
Air Sahara
Air Sahara has established itself as one of the leading players in the Indian Aviation
industry. Air Sahara is part of the multicrore Sahara India Pariwar. Sahara India
Pariwar has interests in Public Deposit Mobilization, Media & Entertainment,
Housing & Infrastructure, Tourism, Consumer Products and Information Technology.
Starting on a modest scale and a capital of only Rs.2000 in 1978, Sahara India Pariwar
has traversed a long way to become an icon in Indian entrepreneurship. Air Sahara
began operations on December 3, 1993 following the Indian government's decision to
open the skies to the private sector.
It operated with a fleet of only two Boeing 737-200s. Today, its fleet includes
advanced aviation technology New Generation Boeings 737-700s and 737-800s and
Classics 737-400s and a fleet of 7 Canadair Regional Jets. The fleet also includes four
highly advanced Helicopters (Dauphin and Ecureuil), which provide efficient charter
services. Offering 119 flights with 11800 seats on a daily basis, Air Sahara flies to
various destinations in India, which include important cities like Delhi, Bangalore,
Mumbai, Kolkata, Lucknow, Hyderabad, Pune, Chennai and others. The airline has
recently added Colombo, Srinagar, Coimbatore, Ahmedabad, Jaipur, Gorakhpur,
Allahabad, Bhubaneshwar, Ranchi and Kochi to its route network. Air Sahara also
operates flights to Dibrugarh, Guwahati, Varanasi, Patna and Goa. The airline is
currently undergoing a complete overhaul and restructuring exercise. Air Sahara has
redefined itself in terms of an efficient and punctual airline with a high record of
ontime-performance and dispatch reliability. Efforts are being made to increase
connectivity and offer convenient timings. A major investment programme has been
launched for the modernization and enhancement of its fleet. Fleet review and route
rationalization have become the focus points of Air Sahara's strategy. Five new
Boeings have been added to the fleet in the last one year. These were used to add new
destinations and increase frequency on existing routes. In the second phase of its
expansion four Canadair Regional Jets have been added to the fleet this year serve on
regional routes. Air Sahara has introduced initiatives such as Steal-a-seat flexi fare
options, Sixer/Super Sixer and Square Drive/Super Four. The Sixer initiative recently
won the 'The Pacific Asia Travel Association' (PATA) award for the year 2003, at
Bali, Indonesia. Air Sahara's frequent flyer programme called Cosmos offers faster
accruals, lower redemption bars and requires no minimum balance for redemption.
Jet Airways
Jet Airways is the second of India's two major airlines based in Mumbai, both, in
terms of market share and passengers carried, after IndiGo. It operates over 3000
flights daily to 76 destinations worldwide. Its main hub is Mumbai, with secondary
hubs at Delhi, Kolkata, Chennai, Bengaluru. It has an international hub at Brussels
Airport, Belgium. Jet Airways In May 1974, Naresh Goyal founded Jetair (Private)
Limited with the objective of providing Sales and Marketing representation to foreign
airlines in India. In 1991, as part of the ongoing diversification programme of his
business activities, Naresh Goyal took advantage of the opening of the Indian
economy and the enunciation of the Open Skies Policy by the Government of India, to
set up Jet Airways (India) Private Limited, for the operation of scheduled air services
on domestic sectors in India.
Jet Airways had emerged as India's largest private domestic airline and has been
acclaimed by frequent travellers as the most preferred carrier offering the highest
quality of comfort, courtesy and standards of in flight and ground service and
reliability of operations. It currently has a market share of 46.7% per cent and operates
a fleet of Boeing and ATR72-500 turbo-prop aircraft. Jet Airways has been voted
India's 'Best Domestic Airline' consecutively and won several national and
international awards, including the 'Market Development Award' for 2001 awarded by
Air Transport World.
Jet Airways was incorporated as an air taxi operator on 1 April 1992. It started
commercial operations on 5 May 1993 with a fleet of four leased Boeing 737-300
aircraft from Malaysia Airlines. In January 1994 a change in the law enabled Jet
Airways to apply for scheduled airline status, which was granted on 4 January 1995.
Naresh Goyal – who already owned Jetair (Private) Limited, which provided sales and
marketing for foreign airlines in India – set up Jet Airways as a full-service scheduled
airline to compete against state-owned Indian Airlines. Indian Airlines had enjoyed a
monopoly in the domestic market between 1953, when all major Indian air transport
providers were nationalised under the Air Corporations Act (1953), and January 1994,
when the Air Corporations Act was repealed, following which Jet Airways received
scheduled airline status. Jet began international operations from Chennai to Colombo
in March 2004. The company is listed on the Bombay Stock Exchange, but 80% of its
stock is controlled by Naresh Goyal (through his ownership of Jet’s parent company,
Tailwinds). It has 13,177 employees (as at 31 March 2011).
In January 2006 Jet Airways announced that it would buy Air Sahara for US$500
million in an all-cash deal, making it the biggest takeover in Indian aviation history. It
would have resulted in the country's largest airline but the deal fell through in June
2006. On 12 April 2007 Jet Airways agreed to buy out Air Sahara for INR14.5 billion
(US$340 million). Air Sahara was renamed JetLite, and was marketed between a
lowcost carrier and a full service airline. In August 2008 Jet Airways announced its
plans to completely integrate JetLite into Jet Airways. In October 2008, Jet Airways
laid off 1,900 of its employees, resulting in the largest lay-off in the history of Indian
aviation. Jet Airways and their rival Kingfisher Airlines announced an alliance which
primarily includes an agreement on code-sharing on both domestic and international
flights, joint fuel management to reduce expenses, common ground handling, joint
utilisation of crew and sharing of similar frequent flier programmes. On 8 May 2009
Jet Airways launched its low-cost brand, Jet Konnect.
The decision to launch a new brand instead of expanding the JetLite network was
taken after considering the regulatory delays involved in transferring aircraft from Jet
Airways to JetLite, as the two have different operator codes. The brand was launched
on sectors that had 50% or less load factor with the aim of increasing it to 70% and
above. Jet officials said that the brand would cease to exist once the demand for the
regular Jet Airways increases.
Jet Airways (India) Ltd’s decision to halt operations from Wednesday evening for
want of funds is set to rattle the world’s fastest-growing aviation market with its
adverse impact on other businesses in the value chain as well as thousands of jobs.
The outcome would also have a ripple effect on competition, fares and customers as
rival airlines scramble to fill up the vacancy caused by Jet Airways' grounding. In an
attempt to mitigate the crisis, the Directorate General of Civil Aviation (DGCA) on
Thursday met aviation industry executives and airport operators. The aviation
regulator’s effort is to put in place a comprehensive plan to bridge the capacity gap
and check a spike in ticket prices. One of the biggest fallouts of the Jet Airways crisis
is the loss of jobs. Industry executives said it is not only Jet Airways employees who
are hit.
“The loss of job of every employee on the rolls of Jet Airways also costs five others
indirectly involved in the value chain," said a senior industry executive, requesting
anonymity. Considering Jet has more than 15,000 employees, that would mean loss of
work for about 75,000 people.
Airport operators, fuel suppliers and other vendors have lost a big customer with Jet
Airways' fall. Once the biggest private airline outside government control, Jet Airways
had a fleet of 119 planes and operated about 600 flights a day—before the liquidity
crisis emerged on 31 December when the airline first defaulted on interest payments.
With Jet Airways halting its flights, Airports Authority of India, GMR Infrastructure
Ltd and GVK Group stand to lose airport landing and parking charges and other rental
revenue from Jet Airways.
These charges make up about a tenth of the price of an air ticket.
A big challenge for the authorities is to ensure that air fares do not surge during the
summer holidays amid a shortage in domestic capacity. Spot ticket prices have already
risen sharply in recent weeks. Although SpiceJet Ltd, IndiGo (InterGlobe Aviation
Ltd) and others are looking to add capacity, it may be some time before they are able
to fully meet demand, especially in the ongoing peak travel season through June.
Surging fares will also likely impact travel plans. Indian travellers tend to travel to to
Europe and North America during the summer holidays. Such long flights require
wide-body planes, unlike the narrow-body aircraft used by most of the incumbents.
Jet’s disappearance from the market is set to have a ripple effect on budget carriers, for
whom a sudden scale-up of operations will be a big challenge. It will add to the
working hours of their employees and raise stress levels, affecting the travel
experience of customers. This will also have an impact on the image of India’s
aviation industry to international travellers," said the same executive quoted above.
For Jet Airways, leaving its existing fleet of a dozen planes grounded is a costly affair
while the exodus of highly trained staff, including engineers, poses a stiff challenge in
executing a quick turnaround if the carrier manages to eventually rope in an investor.
Industry watchers said reviving a grounded airline is much more difficult than turning
around one which is a going concern, even if its operations are minimal.
Also, foreign airlines are likely to eye Jet Airways’ international routes if India does
not quickly bridge the vacuum.
Jet Airways' failure is also set to reignite the aviation industry’s longstanding demand
to bring aviation turbine fuel under the goods and services tax (GST). Such a move
would help airlines bring down their costs as fuel now makes up about 40% of the cost
of running an airline in India.
Experts said the failure of airlines can be tracked to macro-economic factors. “High jet
fuel prices, exclusion of jet fuel from GST and poor airport infrastructure have
affected the health of airlines," said Dhiraj Mathur, former leader of defence and
aerospace practice, PwC India.

SpiceJet
SpiceJet is an Indian low-cost airline owned by the Sun Group of India. It has its
registered office in Chennai, Tamil Nadu, and a corporate office in Gurgaon, Haryana.
It began service in May 2005, and by December 2017, it had a market share of 19.1%
in the Indian domestic market, which makes it the third largest carrier, ahead of Air
India, and GoAir. SpiceJet opened bookings on 18 May 2005 and results followed
immediately as over 37,000 were booked out in just one day, setting a new record in
the Asian continent. Red Hot Special Fares were introduced ranging from (US$1.70)
to (US$13). The first flight was flagged off by the Union Minister of Civil Aviation,
Shri. Praful Patel. The first Boeing 737-800 aircraft left Delhi for Mumbai via
Ahmedabad on 24 May 2005.[11] It was very successful and by 2008, it was India's
second-largest low-cost airline in terms of market share. On 15 July 2008 billionaire
Wilbur Ross suggested he would invest 3.45 billion (US$58 million) in the airline.
SpiceJet accepted an offer in principle from a US-based private equity firm that would
make these funds available. Indian media baron Kalanidhi Maran acquired 37.7% in
the business in June 2010.[12][13] In early 2012, SpiceJet suffered from a loss of over
390 million (US$6.5 million) as fuel prices were reported to have jumped up by as
high as 90%. The money that SpiceJet spent on fuel has exceeded well over 50%
spiraling the airline into losses. As of 2011 Spicejet owed the state Rs. 366 million for
availing airport facilitiesOn 9 January 2012, the Directorate General of Civil Aviation,
reported that several airlines in India, including SpiceJet, have not maintained crucial
data for the flight operations quality assurance or the FOQA. The Bombay stock
exchange later announced that ever since June 2011, Spicejet had been suffering
losses in millions of rupees. BSE reported that SpiceJet suffered a loss of 719.64
million (US$12 million) in March–June, 2400.67 million (US$40 million) in June–
September and 392.60 million (US$6.6 million) in September–December.The airline's
quarterly income also went down in June–September 2011, but somehow the airline
managed to pull its income up to 11758.34 million (US$200 million) by December to
recoup cumulative losses. Despite the losses, Kalanithi Maran doubled his stake in
Spicejet to 16% by investing 1 billion (US$17 million) in the airline. Maran believed
that SpiceJet was going through financial distress because of the steadily rising costs
of Jet fuel. The airline's market share at the time was a little over 16% making it the
fourth largest airline in India. Neil Mills said that the airline was making preparations
so as to directly import jet fuel reducing operational costs.
Ten years back ther were just two Airline both state owned. In the last ten years the
economy has opened up .India has experienced growth rate of 24% per year. The main
factors which effect the Indian economy are:- 1) Increase no of domestic Airlines 2)
Low cost Airlines
3) India’s improving Economy
The other factors are:- 1) Increase in no: of business traveller to different countries.
2) Increase in no: of tourist and business enterprises.
3) Increase business trade due to the rapidly growing economy and free trade
agreement with neigbhouring countries. 4) Favourable Govt: policies and tax
reforms

Role of Airport of Infrastructure in National Economy 1. Airports also represent a

country’s window on the world. Passengers form their first impressions about a nation
from the state of its airports. They can be effectively used as symbols of national
pride, if we pay sufficient attention to their quality and maintenance. 2. In many
remote, hilly and inaccessible areas of the country, air transport is the quickest and
sometimes the only mode of travel available. This is especially true of sensitive
regions on the borders with our neighbours in the west, north and north-east. 3.
Airports need to be integrated with other modes of transport like Railways and
Highways, enabling seamless transportation to all parts of the country. India Growth
Industry
• India’s domestic aviation market expansion has been the strongest in the world
• India is currently the 9th largest aviation market in the world
• It is expected that the civil aviation market will register a compound annual growth
rate more than 16% in the 2010 - 2013Passenger traffic has grown at 18% year on
year basis and the year 2010 closed at 90 million passengers both domestic and
international.
• India is the fastest growing aviation market and expected to be begin 4-5 big
aviation market by 2020 and 3rd in terms of domestic market after US and China.
During the last two decades from a fleet of only about 100 the scheduled operators
now have reached 435 aircraft connecting the nation and the world.
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