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B&E This Fortnight
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Issue Date - 01/03/2012
Lower GDP Stats
Despite desperate attempts of the government to move the numbers in the economyís favour, GDP growth projections for the current fiscal year remains at 6.9% against last yearís figure of 8.4%. The slowdown in investments and low industrial output are the reasons for this decline. However, finance minister Pranab Mukherjee is still confident that the numbers will look up when full data for the year 2011-12 becomes available. The government has already run up fiscal deficit†of 92.3% of its budget estimates in the first nine months of the current year, mainly due to less than anticipated tax collections. The central government has managed to raise Rs 5.2 trillion in revenue during the period, which is 61% of the budgeted target for the entire fiscal. The figures indicate that the government will find it difficult to meet its budgeted fiscal deficit target of 4.6% for the current fiscal. A lower than expected 1.8% growth in the index of industrial production (IIP) for the month of December 2011 has not helped matters either. Meanwhile, much to the relief of the government, the wholesale price inflation is on a 26 month low and is expected to stay at these levels at least for the next few months.

Airlines cheer
Much to the relief of airlines the group of ministers (GoM) has okayed the proposal for direct import of aviation turbine fuel (ATF), which contributes around 40% of the overall operating cost of an airline. However, the decision is yet to get the Cabinet go-ahead, which will open the way for implementation of the scheme. Airline operators have been lobbying for quite sometime for either imposing a flat 4% sales tax or to allow them to import ATF directly. The GoMís approval of the scheme sent share prices of airlines like Jet Airways, Kingfisher and SpiceJet on an upward spiral as investors cheered the move. Allowing direct import of ATF will help airlines to save on sales tax, which varies from state to state. The absence of a uniform sales tariff has forced airlines to bear the cost of around 30% rise in their fuel expense on a y-o-y basis. Surprisingly, ATF in India is at least 60% higher than prices in West Asia or even Southeast Asia. ATF makes for 40-50% of the total cost for airlines companies. No wonder that operators like Jet and SpiceJet have been complaining that itís the high fuel cost that has been responsible for their December quarter losses.


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