The “Business” and “Economics” of the Hajj Subsidy

Thanks to RealityCheck for prompting this post. Read on for an amazing story of discretionary powers, patronage, quotas and favours that revolves around the Hajj subsidy. The extracts are from a court order disposing off the special leave petition filed by Union of India (please note that emphasis has been added).  They make for a long reading but are well worth pondering upon..

*** CAUTION: Long Post ***

..By this interim order, we (Supreme Court) propose  to  deal  with  some  of  the issues arising from the 2012 Haj Policy on a  priority basis leaving others to be dealt with in due course.

THE PTOs (Private Tour Operators)

The dispute between  private  operators/travel  agents  and  the Government of India for registration as PTO for carrying Hajj Pilgrims is of a recent origin but is tending to become an annual feature.   It is, therefore, necessary to address  the  issue  and  to  conclusively resolve it.

In order to clearly understand the context in which the  dispute arises a few facts are required to be taken into account. Under a bilateral agreement ..the Kingdom of Saudi Arabia..assigns  a fixed number of pilgrims that are permitted to visit Saudi Arabia  for performing Hajj..a relatively small portion is specified for the PTOs and the rest for the Haj Committee of India.

Before 2002, the PTOs  were  allocated  Hajj  seats  directly by the Kingdom of Saudi Arabia..After Hajj 2001, the Kingdom of Saudi Arabia made it  mandatory for the PTOs to come through their respective Governments. From 2002, therefore, the Government of India was  obliged  to  evolve  a  system under which private operators/travel agents  would  be  registered  as PTOs..

…Initially, there were not many private operators/travel agents  coming forward to claim any share in the seats..but around the year 2006 more and more private operators/travel agents started  claiming  allocation from the Hajj seats reserved for PTOs. It appears that it took three or  four years for the people in this line of business to realize that this  was  the opening up of a new highly lucrative commercial venture.

..thus (although)..for the past four or five years the  number  of pilgrims reserved for PTOs ..has  slightly gone down, there has been a large increase in the number of registered PTOs and an even larger increase in the number  of  applications  for registration as PTOs.

..From these facts, it is not difficult to deduce that the dispute between the private operators/travel  agents  and  the  Government  of India in regard to registration as PTOs arises from a conflict  of object and purpose.  For most of the private  operators/travel  agents registration as PTOs is mainly a question of more profitable business. Under the bilateral agreement no PTO can be given a quota of less than fifty pilgrims. Normally, a quota of fifty pilgrims would mean, on  an average and by conservative standards, a profit of rupees thirty  five to fifty lakhs. This in turn means that  any  private  operator/travel agent, successful in getting registered as a PTO..would easily earn rupees thirty five to fifty  lakhs  in  one and a half to two months and may then relax comfortably for  the  rest of the year without any great deal of business from any other  source.

As you can imagine, where there is a system of quotas, permits and subsidies, can corruption be far behind?

The  Attorney General stated that during the 2010 Hajj, the Ministry got  complaints from various quarters regarding black marketing of seats by some of the PTOs. It  was  informed  that  some  of  the  PTOs  after  getting registration and allocation of seats instead of carrying the  pilgrims themselves sold the seats to other PTOs.  The Ministry decided to take action against such unscrupulous PTOs but it found that many  of  them had no offices at all. The addresses furnished by them were  fake  and they were all fly by night operators.

With a quota in place and no objective basis for selection, it was going to be a matter of time before the provisioning of service and customer care took a hit. Sure enough,

The  Attorney General  further informed the Court that it was often seen in the past that  PTOs  left the pilgrims in Kingdom of Saudi Arabia and what is  worse left  them unattended even while hospitalised ..There were instances when pilgrims who met with  an  accident  during  their stay..were not given any medical aid or  any kind of help or assistance. In many cases the  PTOs did not provide even the  promised facilities.

Let us now turn our attention to what the Supreme Court said about the “Hajj Subsidy”. Please bear in mind that what you read below are the exact words of the order. I have simply reproduced them as they are, albeit with added emphasis to underscore the main points:

THE HAJJ SUBSIDY

As regards the Hajj subsidy, from the figures for the past  19 years..it  appears that the amount of subsidy has been increasing every year. This is  on account of increase both in the number of pilgrims  and  the  travel cost/air fare.  In the year 1994, the number  of  pilgrims  going  for Hajj from India was as low as 21035; in 2011, the number  of  pilgrims increased to 125000. In the year 1994, the cost of travel per  pilgrim was only Rs.17000.00; in the year 2011, it went up to Rs.54800.00.  As a result, the total Hajj subsidy that was Rs.10.51 crores in the  year 1994 swelled up to Rs.685 crores in the year 2011.

…It is further stated in paragraph 24  that  the  grant  of  Hajj subsidy by the Government of India was challenged before this Court in a petition under Article 32 of the Constitution of India registered as Writ Petition (Civil) No.1 of 2007 (Prafull v. Union of  India).  This Court by a  reasoned judgment and order dated January 28, 2011, dismissed the writ petition upholding the constitutional validity of the Haj Committee Act, 2002 and the grant of subsidy by the Government of India in the air fare of the pilgrims.

From the statement made..the affidavit..it is clear that the Government..has no  control on the cost of travel for Hajj. The air fare to Jeddah  for  traveling for Hajj is increased by airlines to more than double as a  result  of the regulations imposed by the Saudi Arabian Authorities.  It  is illustratively stated in the affidavit that in the year 2011, the  air fare for Hajj was Rs.58,800/- though the normal air fare to  and  from Jeddah should have been around Rs.25,000/. In the same  paragraph,  it is also stated that for the Hajj of 2011,  each  pilgrim  was  charged Rs.16,000/- towards air fare. In other words, what  was  charged  from the pilgrims is slightly less than 2/3rd of the otherwise normal fare.  We see no justification for charging from the pilgrims an amount  that is much lower than even the normal air fare for a  return  journey  to Jeddah.

..Nevertheless, we are of the view that Hajj subsidy is something that  is  best  done away with.
This Court has no claim to speak on behalf of all the Muslims of the country and it will be presumptuous for us to try to tell  the Muslims what is for them a good or bad religious practice. Nevertheless, we have no doubt that a very large majority  of  Muslims applying to the Haj Committee for going to Hajj would not be aware of the economics of their pilgrimage and if all the facts are made  known a good many of the pilgrims would not be very comfortable in the knowledge that their Hajj is funded to a substantial extent by the Government. We remind ourselves that the holy Quran  in  verse  97  in Surah 3, Al-e-Imran ordains as under:
“ 97.  In it are manifest signs  (for  example),  the  Maqam (place) of Ibrahim (Abraham); whosoever enters  it,  he  attains security. And Hajj (pilgrimage to Makkah) to the House (Ka’bah) is a duty that mankind owes to Allah, those who can  afford  the expenses (for one’s conveyance, provision  and  residence);  and
whoever disbelieves [i.e. denies Hajj  (pilgrimage  to  Makkah), then he is a disbeliever of Allah], then  Allah  stands  not  in need  of  any  of  the  Alamin  (mankind,  jinn  and  all   that exists).”[1]
We, therefore, direct the Central  Government  to  progressively reduce the amount of subsidy so as to completely eliminate it within a period of 10 years from today. The subsidy money may be more profitably used for upliftment  of the community in education and other indices of social development..

Not finished yet. Read on to find out what the Supreme Court had to say on the system of patronage and favours also known as the “Goodwill Hajj Delegation”.

THE GOODWILL HAJJ DELEGATION

The issue of the Goodwill Hajj Delegation raises two  questions; one in regard to the reasonableness and justification for  sending  an official delegation..and the other about its composition and the manner in which people are nominated as members..The primary purpose of the delegation, according to the affidavit,  is “to convey  goodwill  on  the  auspicious  occasion  of  Hajj  to  the Government of Saudi Arabia as well as to the Indian Pilgrims”

Just why such  “goodwill” ought to be communicated at the general tax payer’s expense is beyond me (note that this is beyond the usual goodwill very ably conveyed by our normal diplomatic activities and embassy in Saudi Arabia). But we may be getting ahead of ourselves..

..in 1967  the  Goodwill Delegation consisted  of  three  members.  Till  1973,  there  was  no material increase in its size and till 1987 the number of its  members remained  under  ten.  Thereafter (from 1987),  the  delegation  started  steadily increasing in size and in 1997 the Goodwill  Delegation  was  of  31 members...In the  year  2011, the number was marginally reduced to 27.

..The affidavit does not disclose any criteria  or  guidelines  on the basis of which persons are selected  for  being  included  in  the Goodwill Delegation. From the list of  the  members..for a period of 10 years no rational basis  is  discernible for selecting members for the delegation. The list shows  a  disparate group of persons randomly put together..

What is more surprising is that there are  some  people who were able to go as member of the  Goodwill  Delegation  more  than once, some even three or four times…the nomination to the Goodwill  Delegation  evidently  works  on patronage and granting of favours.

On  the  basis  of  the  materials..we  have  no  doubt  that  the  way  people  are nominated as  members  of  the  Goodwill  Delegation  is  in  complete violation of Article 14 of the Constitution…

The Supreme Court further observed that the reason/purpose of the delegation appears to be meaningless:

..the Goodwill Hajj Delegation is justified on two other counts (1) to convey goodwill..and (2) to oversee and facilitate..the arrangements made for pilgrims… Dealing first with the second reason, we are constrained to say that it appears quite unconvincing.

..the making  of arrangements for the pilgrims is the duty and  responsibility of Haj Committee of India, a statutory body,,The arrangements are further over seen  by  the  Consulate General of India,  Jeddah  and  the  Embassy  of  India,  Riyadh.  The arrangements are, thus, looked after by competent professional  people..We are unable to accept the second reason given as justification for  sending  the  Goodwill  Hajj Delegation.

Coming now to the first reason, that is, to convey  goodwill..we completely fail to see how even that purpose can be served by sending such a large, unwieldy,  amorphous  and  randomly selected delegation.

On a careful consideration..we are quite clear that the present practice of sending Goodwill Hajj Delegation must come to stop.

..In this interim order we have primarily dealt with the issues of PTOs, Hajj Subsidy and the Goodwill Hajj Delegation. There  are  other issues which we propose to deal with in due course.

In the affidavit filed on behalf of the Union of  India,  it  is stated that from the overall number of 1,70,000 pilgrims  fixed  under the bilateral agreement, the Government of India sets apart a quota of 11,000 seats to be reserved..

..We would like to know in greater detail how the special  quotas  under the heads (i) to (vii)  are  allocated…We  would  specially like to examine the functioning of the Haj Committees  of  the  States where the number of applicants  exceed  the  quota  allotted  for  the state.

We direct  the  Haj  Committee of India to file a detailed affidavit giving full details of the process of selection of  pilgrims from the applications made to the State Haj Committees.  The affidavit should also give details of the charges realized from the pilgrims and the facilities made available to them.

The Court fixed 23rd July as the next date for the hearing. I am looking forward to the replies by the state governments and Hajj Committees (although not holding my breath)..

Related Posts: Of Subsidies and Politics of “Secularism” and On MahaKumbh and Subsidies