CAG punches holes in AIs Haj subsidy claims

Written by Shaheen Mansuri | Mumbai | Updated: Aug 24 2010, 05:45am hrs
The Comptroller and Auditor General of India (CAG) has in its recent audit report found flag carrier Air India (AI) making inadmissible claims on Haj subsidy amounting to Rs 51.34 crore and Rs 125.7 crore over a period of 2002-2006-II (second quarter).

The carrier did not provide adequate justification to the ministry of civil aviation (MOCA) for the additional amount it took, over the regular subsidy which it is entitled to.

Haj subsidy is provided by MOCA and it is the difference between the airfare paid by pilgrims sponsored by the Haj Committee of India (HCOI) and the costs charged by the airline making transport arrangements.

MOCA is the nodal agency responsible for handling the movement of Indian pilgrims. Haj flights are undertaken by AI in association with Saudi Arabian Airlines (SAA) as per a bilateral agreement between India and Saudi Arabia and these operate currently from 17 embarkment points in India.

AI claimed additional amounts on accounts of catering on ground due to delays, publicity and give-aways, ferry cost for positioning of leased aircraft from stations to an operating stations.

These charges were claimed by AI and were allowed by the MOCA without details, in the absence of which their authenticity and relevance to Haj operations could not be verified, state the audit report conducted by CAG.

AI claimed and was paid interest of Rs 46.29 crore, since the on-account payments by MOCA did not cover the entire amount, and the residual amount had to be financed by AI through commercial borrowings from the market.

This interest was claimed, since dues on account of Haj operations were not settled promptly, in fact, the final payment of Rs 4.54 crore for Haj operations of 2002 was made only in 2007-08. These interest payments could have been avoided, had claims been submitted, scrutinised and settled in time.

The audit report reveals that from 2001, MOCA decided that the Haj traffic was to be taken care of collectively on a 50:50 basis by AI and SAA at a fixed cost of $700 per pilgrim plus $10 as insurance surcharge.

Compared with the rates charged by SAA, the overall cost per pilgrim ultimately claimed by AI from MOCA ranged between $940 to $1,235 during Haj 2002-2006-II. As regards payments to AI 'on account' advance payments are made by MOCA through its budget, subject to final adjustments after completion of Haj operations. No norms or guidelines have been stipulated for such on account payments.

The audit report further says that in pursuance of a cabinet decision relating to Haj 2006-II, an expert group was set up in February 2007 to review the policy for future Haj operations.

However, despite the recommendations of the expert battery, there was no change in the airfare, which was retained at Rs 12,000 till May 2009, when the airfare was raised to Rs 16,000. This, coupled with inefficient management of operations, resulted in huge amounts of subsidy.

However, the observation of the expert battery was reviewed by the group of ministers (GOM) in August 2007. However, the GOM has referred this to the ministry in September 2008, the reply was awaited as in March 2010.