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Iraq war will adversely impact Indian economy: CII >From Indo-Asian News Service New Delhi, Mar 18 (IANS) A prolonged war in Iraq would adversely affect the Indian economy, given its dependence on imports for 70 percent of crude oil requirement, business lobby Confederation of Indian Industry (CII) said Tuesday. A short war could be beneficial for the U.S. and lead to decline in oil prices "as geopolitical uncertainties are eliminated," said CII in its economic outlook report for 2003-04. On the other hand, a prolonged war and consequent rise in terrorist activities, would affect the stability of Indian economy though the country is not directly involved in the conflict, CII opined. "While a higher (oil) import bill will be manageable, a greater threat is the pressure on profitability of the manufacturing sector due to a rise in fuel costs," the report stated. "Second, the increase in uncertainty would dampen global recovery and affect India's export recovery, particularly in the services sector." The report warned that "India being a key target for terrorist attacks, the country's risk premium is bound to rise." India's petroleum products consumption have been rising over the last few years with a total of 107 million tonnes in 2001-02 compared to an average of 60 million tonnes in the 1990s. However, there has been a decline in the incremental GDP produced per unit increase in oil consumption, the report points out. "Thus the amount of crude oil required for a six percent gross domestic product (GDP) growth is now higher than it was a decade earlier," the CII has stated. Discounting government estimate of a lower 4.4 percent GDP growth in 2002-03, the industry body maintains that India would clock a growth of at least 5.0 to 5.2 percent. The industry body disagrees with the estimate that the agriculture sector will clock minus three percent growth, given that the first quarter results have estimated around four percent growth, followed by flat growth in the second quarter. In the case of a short war, CII estimates global oil prices could come down quickly after peaking at $38 per barrel. With the possibility of a war looming large, ending the uncertainty, global oil prices reacted swiftly Tuesday witnessing the sharpest fall since early this year. U.S. light crude was down $2.73 to $32.20 a barrel while London's Brent crude dropped $2.58 to $26.90 a barrel. In the worst case scenario, the industry body estimates that the oil prices could increase to $48-50 per barrel during the hostilities and average $36 over the year. During the 2002-03 fiscal, Indian basket of crude imports has averaged $28 per barrel, with the total import bill estimated to be $16 billion. In the event of the prices scaling up further to $36 per barrel average, India's oil import bill could reach $22.8 billion in the worst-case scenario, the CII states. In the last two years, an increase in oil prices has been seen to adversely impact industrial growth. "While it is difficult to isolate the impact of fuel prices on growth, we fear that the recessionary impact may be similar in case of a sharp and sustained increase in oil prices," the report said. But all going well, CII is confident that manufacturing, industry and services will continue to show growth in 2003-04 to help India clock six percent GDP growth. --Indo-Asian News Service War on Iraq to affect Indian aviation: minister >From Indo-Asian News Service New Delhi, Mar 18 (IANS) War against Iraq would affect Indian aviation as Middle East operations would be cancelled, west bound flights diverted and fares hiked, Civil Aviation Minister Syed Shahnawaz Hussain said Tuesday. Fares might be hiked shortly, the minister indicated as he went in for a cabinet meeting to discuss contingency plans in case war broke out in the region. "The moment war breaks out, Air-India and Indian Airlines will have to cancel their operations in Dammam, Bahrain and Kuwait," Hussain told reporters. "Air-India will suffer a monthly loss of Rs.750 million and Indian Airlines, Rs.400 million." In fact� Air-India, which was projecting a profit of Rs.1.35 billion in the current year, was staring at losses that could be over Rs.500 million. Due to the closure of airspace in the region in case of a war, the airline's losses would mount to Rs.1 billion. Air-India operates eight flights to Dammam, six to Bahrain and seven to Kuwait each week. The minister said the consequences of a war on Iraq would be worse than those of 9/11, following which civil aviation worldwide went through its worst crisis. "It is a double blow on aviation as well as tourism, with 30 percent of tourists from the West cancelling their trips to India," he observed. Asked about refuelling facilities to U.S. aircraft, Hussain declined to comment, stating the decision could be taken only by the government or the cabinet committee on security. He said the government was prepared to evacuate Indians from the region at a short notice. "Both Air-India and Indian Airlines can bring 50,000 Indians each week. We can respond within hours, not days." The increase in the price of aviation turbine fuel would also lead to major losses for the airlines, especially since flights would have to be diverted over Iran to avoid the war-affected airspace where all civilian air operations would cease. Air India's flights to the U.S., London, Frankfurt and Paris would take two hours more. Since December, the cost of aviation turbine fuel had increased by 44 percent from $1.01 to $1.44 per gallon. Expressing concern over the impact of war, the minister said due to the ban on the Pakistani airspace, Air India was already losing Rs.400 million a year. "After the Iraq war, losses will mount to Rs.1 billion a year." Air India operates 13 flights to U.S. - three via Paris to New Jersey, seven via London to New York and three via London to Chicago each week. It also operates three flights a week to Frankfurt and one to London. "In the event of war, the flights would be longer by one to two hours and would consume much more fuel. With the cost of operation going up we cannot discount the possibility of a fare hike," said Hussain. He said the International Air Transport Association (IATA), comprising 150 airlines worldwide, was expected to take a decision in a day or two on increasing the fares by five percent. "We hope the IATA's decision can enable us to increase our fares by 8 to 10 percent so that we can offset our war and fuel surcharge." Air India's fuel bill had increased from Rs.100 million in January to Rs.110 million in February and estimated to be Rs.300 million in March. Hussain pointed out that India's airlines were already suffering losses due to the ban on their flights through Pakistani airspace in the midst of a diplomatic face-off since December 2001. Due to the imminent Iraq war, the flights to Europe and the U.S. would have to be diverted by about 200 nautical miles leading to a rise in fuel consumption to the tune of Rs1 million to Rs1.5 million for each aircraft. "If the war intensifies, then even the Iran airspace would close down and Air-India's west bound flights would be 2.15 hours longer. Flights would then have to be terminated at Mumbai instead of the onward journey to Delhi," Hussain said. --Indo-Asian News Service _______________________________________________ Goanet mailing list [EMAIL PROTECTED] http://www.goanet.org/mailman/listinfo/goanet
