Haj subsidy has Air India fuming

Sep 13 2008, 23:05 IST
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SummaryThe Cabinet’s decision to increase the number of pilgrims availing the Haj subsidy and flying by the national carrier this year has had Air India fuming.

The Cabinet’s decision to increase the number of pilgrims availing the Haj subsidy and flying by the national carrier this year has had Air India fuming. For a carrier already reeling under Rs 2,000-crore loss and burdened with severe employee-related issues, a welfare measure like this puts undue duress on it.

Interestingly, Air India does not even get to set the amount of fare payable to the carrier transporting the pilgrims. This is set by the Saudi Arabia Airlines that also carries out the Haj duty.

“The sheer volumes of people and logistics and resources that go in the Haj duties is huge,” an official attached with the national carrier said.

“Aircraft engaged in Haj duty have to first pick up pilgrims from the smaller towns which have been approved as part of the hub and spoke arrangement, and then after they drop the pilgrims to the final destination, they come back empty,” he added. Similarly, in order to pick up the pilgrims, the aircraft have to go to Jeddah empty, which results in an increase in expenditure. Any commercial airliner does not view huge aircraft flying empty favourably as it implies a loss in revenue.

Last year, Air India had pitched for allowing private airlines to operate Haj flights, saying this could lead to a cut in fares and reduce the subsidy burden.

Under a bilateral agreement between India and Saudi Arabia, any Indian going for the Haj has to fly by Air India or Saudi Arabian Airlines, giving the two carriers a monopoly in carrying the pilgrims.

In a reply to a query under the Right to Information Act, Air India had said: "There is no benefit to the government of India (in giving) AI and Indian monopoly in operating Haj flights. Allowing private airlines to operate on Haj flights may result in reduction in fares and reduction in burden of subsidy to the government."

The reply, by Air India's then public information officer and general manager (finance) A J D'Souza to Mumbai-based activist Attar Azeemi’s query dated June 22, 2007, stated "Air India does not have the capacity to operate Haj flights. Therefore, aircraft are leased by AI for carriage of Haj pilgrims," D'Souza said.

Over and above this, according to Air India officials, one major reason for last year’s severe delays and cancellations in air travel faced by the national carrier was the diversion of aircraft towards Haj operations. Since 1993 (except 1997), due to the heavy volume of passengers going on the Haj, Air India started wet-leasing aircraft from other carriers. The Haj season comes during the peak season for air travel and aircraft for lease come at a premium. Wet-leasing involves the hiring of an aircraft along with its pilot and crew. Last year, Air India wet-leased three aircraft from low-cost carrier Spicejet to aid in Haj operations.

The standing committee on external affairs and the transport and tourism parliamentary standing committee had also recommended that the government progressively reduce and eventually eliminate the Haj subsidy altogether. The expenditure reforms commission in its tenth report has recommended that till the time the modalities of phasing out of the subsidy is decided, it should be frozen and the number of pilgrims availing it should also be frozen.

The Cabinet on Thursday kept the amount paid by the pilgrims for the round trip to Jeddah and Medina at Rs 12,000, as it has remained since 1994. In 1991, the amount paid by the pilgrims was Rs 10,000 as against Rs 14,056 per passenger paid to Air India by the government. This amount was then gradually raised to Rs 12,000 by 1994 against Rs 17,000 paid to the carrier. Last year, while 1,10,000 pilgrims availed the subsidy paying only Rs 12,000 each, the amount paid by the government to the carrier was Rs 47,454 per passenger.

According to sources, the total cost for Haj operations last year (for 1,10,000 pilgrims) was Rs 727 crore of which the subsidy requirement was Rs 595 crore.

This year, in order for the pilgrimage of 1,23,211 pilgrims, the total cost estimated by the government is Rs 847 crore, of which the subsidy requirement will be approximately Rs 700 crore.

Air India has been operating the Haj charter flights since 1954. Before that, pilgrims used to travel by ship with the ministry of shipping paying the subsidy.

The number of Haj pilgrims has risen significantly since 31,000 in 1995. In 2000, Air India carried 71,924 pilgrims to Jeddah and on Thursday the Cabinet approved an increase in the total Haj pilgrims that can avail the subsidy to 1,23,211 from 1,10,000 a year earlier.

According to sources, there are four main elements in calculating the cost of operating the Haj subsidy.

These include ACMI (aircraft, crew, maintenance and insurance), other operational costs like airport charges and catering among other services, unrecovered hidden cost like salaries of people working the whole year for smooth Haj operations and the service tax on Haj operations levied by the service tax department for which exemption has been denied by the finance ministry.

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