Flight of fancy from Sahara
PSU shares shook UTI: Shourie
Fourth cell licence up for bidding again

New Delhi, Aug. 18: 
Air Sahara today kicked off the mother of all fare wars in Indian skies with a new permanent ticket auctioning system where travellers can bid for a seat on a flight 25 days in advance — the bonanza, however, will come with a few strings attached.

The system, modelled on Europe’s highly successful Ryan Air’s ticket selling strategy, offers travellers a chance to bid for up to 10 per cent of all tickets between 25 days and 15 days from the flight date. The three airlines operating in the Indian skies are already slugging it out with fare cuts and various kinds of promos, but this is expected to trigger off a fresh and considerably more intense round of fare wars.

“We are bringing in the international system of ticket bidding. By doing this, we want to sell off all the extra seats that are now going vacant ... and it is certainly going to catch my rivals off guard. I have nothing to lose in this, but they (as far bigger and more entrenched players) have, in fact lots more,” Air Sahara chief executive Uttam Bose said. The airline claims an average occupancy of 55 per cent, lower than the 65-70 per cent that aviation pundits say is necessary for an airline to remain profitable, and has a market share of just under 10 per cent.

However, while the traveller can technically bid for as low as Re 1 just 25 days away from the flight date, a lower bid ceiling sets in from the next day and progressively goes up every subsequent day. For instance, a flier on the Delhi-Calcutta route can bid for Re 1 the day bidding starts. He gets to know that very day whether he is successful or not. Next day he can bid but at a price of more than Rs 2,400. The day after, this bottom ceiling goes up to Rs 2,550, and by the last day, that is 15 days from the flight date, the lower bid ceiling goes up to Rs 2,800.

In comparison, first and second AC Rajdhani fares are Rs 4,370 and Rs 2,550 on the Delhi-Calcutta route. “I know I will be selling tickets at rates lower than the Rajdhani Express and railway minister Nitish Kumar might well object. But I have checked with my lawyers and this system does not contravene any monopoly laws of any kind,” Bose said.

Bids will be opened the same day and announced after 8.00 pm every day. Those bidding on the internet can do so right up to 8.00 pm but those bidding through travel agents can only bid till 4.00 pm. After this, unsuccessful bidders are offered a chance to buy the ticket they had bid for at a slightly higher rate, which too varies from day to day. While 24 days from the flight, a Delhi-Calcutta traveller can buy the ticket at a “price buy” of Rs 2,800, almost equal to the discounted fare of Rs 2,860 at which Jet and Indian Airlines are selling tickets 21 days in advance right now. By the last day of the bidding for the flight in question, this “price buy” goes up to Rs 4,000, against a published fare of Rs 6,400.

However, there are catches to the system. There can be no cancellation of sales made through this system, they can be postponed only once on payment of Rs 100 and for a date as far away from the day the traveller intimates that he wants a postponement, as he was from the original day of travel when he bid. Also, bidders can make only one bid, the computer will reject any bids from the same person even if made from different places.

“We don’t really think any seat will go for just Re 1 but on certain sectors they could go at say Rs 500, when the published fare is Rs 4,000,” a senior Air Sahara executive said.

Bose added that he would be inducting some three new wide-bodied Boeing 437-700s and 8 new 50-seater Bombardier jets by December end, tripling the number of flights from a current 53 a day.

Rivals Jet Airways and Indian Airlines are scrambling to face up to the new threat in the skies. However, a Jet Airways spokesperson declined comment on the Air Sahara move, while IA officials could not be reached for their reaction.


Calcutta, Aug. 18: 
Disinvestment minister Arun Shourie said the Unit Trust of India (UTI) had lost up to Rs 6,000 crore “in opportunity cost” for investing in shares of government-owned companies.

“The government is undoubtedly responsible for Unit Trust’s miseries to that extent,” Shourie said, addressing entrepreneurs in Calcutta on Saturday. Though he did not say as much, this is arguably the most cogent argument ever put forward by the government to defend its decision to bail out UTI each time it ran into trouble.

Explaining the Centre’s assessment, Shourie said: “I am not saying that UTI had invested in the shares of government-owned companies under duress, but had it invested the same amount in fixed income instruments, it would have earned up to Rs 6,000 crore more.”

“There was hardly any trading in public sector companies as investors did not have confidence in their managements. Hence, there was no appreciation in the value of UTI’s investments in PSU shares. But things changed as the divestment programme gained momentum. The market capitalisation of most public sector companies has increased dramatically, and UTI can realise better value for its investments now.”

On National Aluminium Company (Nalco), Shourie said the government would first issue shares in the market—both in India and the US—before inviting bids from strategic investors. “Nalco will soon issue an additional 10 per cent of its stock in the Indian stock markets, and 20 per cent in the US,” he added.

Further, the government today said it would invite initial bids for offloading 29 per cent in Nalco by next week without a specific turnover criteria for prospective bidders.

The Cabinet Committee on Disinvestment (CCD) had earlier cleared a proposal to disinvest 60 per cent in Nalco through a combination of strategic sale, domestic offering and American Depository Receipts (ADRs).

Shourie also allayed fears that the petrol pump allotment scandal could defer the disinvestment of the two state-owned oil companies—Hindustan Petroleum (HPCL) and Bharat Petroleum (BPCL).

Brushing aside concerns that court cases arising out of the cancellation of licences for petrol pumps and kerosene dealership could stall their disinvestment, Shourie said: “All liabilities arising out of such litigation will be absorbed by the government and will not be passed on to the strategic investor.”

The CCD will discuss HPCL and BPCL in its next meeting, which is likely to take place between August 28 and September 10. It is not clear yet whether the government will first dilute its stake in the two oil companies by issuing shares in the market and then sell its stake to a strategic investor, or sell them off through competitive bidding without expanding their equity base.


New Delhi, Aug. 18: 
After drawing a blank last year, the government will invite bids for the fourth mobile operator in Bengal, Bihar and Orissa this week.

The three eastern states were among the 17 circles up for grabs by firms, but did not find any takers because prospective entrants thought they would have to contend with the well-entrenched Reliance and Bharat Sanchar Nigam Limited (BSNL). Also, there was a feeling the cake wasn’t large enough — not for too many players to wangle a slice.

However, COAI figures on mobile users show that there are more people going cellular in the east than they were doing last year. Orissa had 1,44,672 subscribers in July 2002 against 31,516 same time last year. In Bihar, the number went up to 70,191 from 53,823, while Bengal boasted of 52,502 mobile connections in July compared with 23,946 in the same month last year. Two years back, in July 2000, the tally was 6,027 for Bengal, 12,184 for Orissa and 30,172 for Bihar.

“At present, the cost to service a subscriber, based on infrastructure, is $ 60. However, one has to add the land acquisition cost and other expenses, which work out to $ 15. If an operator has to survive, it needs at least 1 lakh subscribers. That means, an investment of at least Rs 75 crore for one lakh subscribers,” a senior executive of a mobile firm said.

Tenders, to be sold from August 19 to September 23, will have to be submitted by September 30. There are no indications of the price — also the entry fee — the circles will elicit. Last year, Mumbai received the highest bid at Rs 300 crore, while Himachal went for Rs 4 crore.

The bidder’s minimum net-worth should be Rs 30 crore for Bihar and Orissa circles, and Rs 50 crore for Bengal. Net worth is the total of paid-up equity and free reserves.

Bihar (including Jharkhand), Orissa and Bengal are expected to have the fourth mobile operator up and running by next year, but they would still have one slot vacant. That will happen because Koshika Telecom’s licence as the third player in Bihar and Orissa was cancelled after it failed to cough up its dues.

Bengal is serviced by BSNL and Reliance Infocom, but two more operators can offer cellular services in the state. Those successful will have to deposit 20 per cent of the bid amount within two days of the issue of demand letter, and the remaining 80 per cent within 10 days. A firm may table bids for as many service areas as it likes, but existing licensees cannot bid for the same service area.

This licence will be valid for a period of 20 years from the effective date, unless revoked earlier for reasons as specified elsewhere in the document. The government may extend it by 10 years at one time, upon request of the licensee.

For the Orissa and Bihar telecom circles, the government has allotted frequency-band of 1710-1785 MHz paired with 1805-1880 MHz. Bengal has been given a frequency-band of 890-902.5 kHz paired with 935-947.5 kHz.


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