Thursday, October 29, 2009

High-Cost Flying and DG (no-see) A

I remember appreciating the DGCA a few years ago for a rare attempt to show it is not owned by Prafool Patel, who is owned by You-Know-Who. It forced airlines to state the all-inclusive tariff on their web pages and ads. Otherwise, it had become a nightmare to compare Rs.1 tickets against Rs.0 tickets with varying levels of "fees and taxes". Sadly, now DGCA seems to have its hands full with lecherous pilots and runaway VIPs. The cartels work so transparently in the airline industry that a first-year economics student could write a paper on it. Yet, the regulator is unable, unwilling or uninterested in calling their bluff. Instead the Minister doles out a new package to these 'loss making' companies every few weeks, waiving off fuel arrears or infusing interest-free loans. In return, airlines continue to show more losses after paying for free VIP tickets, executive perks and poor-pilots strikes.

A list of the creative ways in which low-cost airlines get money that rightfully belongs to us, shedding tears while they do it:

1. No refunds if you cancel a ticket. The money stays with them. If you don't travel with THEM again within a SHORT period (like 6 months), you lose it. If you are someone old who travels just once a year, or a foreigner, too bad.

2. If you want clear instructions on how to re-use the balance, go rub a lamp. The website won't help. Spend half an hour on the phone, providing all sorts of verification, and then pay transaction charge for booking the new route (which is free in case of web booking). Fail one verification query, and lose it.

3. All this is on top of the cancellation fee which is often double or more the "base price" of the ticket (they claim the rest just goes to the fuel company or the government, anyway).

4. Even on a normal ticket, they have a paradoxical charge. There's the airport congestion fee (that implies LACK of airport infrastructure) as well as an airport development fee (that implies a GREAT new airport infrastructure) on the same ticket. Aren't these two conditions mutually exclusive?

5. Finally, of course, is the stale sandwich at airport cafes that somehow deserves to priced at Rs.150. By what logic, man?

I am all for paying a premium to get great service. Paying for services not used or exaggerated is plain disgusting.

It would be nice to see DGCA demand to know what percentage of the airlines' cash-flow comes from such unaccounted monies. It doesn't take a finance-whiz kid for them to park it safely in the "liabilities" column. Sure, it's a liability to carry someone else's money for 6 months and earn free interest on it, until it lapses and you can finally sieze it.

Liberalisation has opened a new can of worms for Indian consumers. Now that private sector has the flexibility to create confusing and complex packages and plans for most services, a regulator is required on top of them to ensure consumer rights. Somehow we feel this is an acceptable compromise in the absence of a consumer-forum with teeth.

So we have the IRDA for Insurance, TRAI for telecom, DGH for petroleum, SEBI for stocks, God-Knows-Who for cards and loans (that's a separate post) and DGCA for airlines. As scams in all these sectors have shown, the regulators have been as effective as the 70 year old watchman we have to guard our building gate. Unlike the old guard, who is a result of budgetary constraints, the sleepy regulators appear to be deliberate. It gives the appearance of control while allowing everyone to profit, usually at the expense of the consumer or worse, the exchequer (Hail Raja!).

The beauty of the scams lie in the fact that each unit of misdeed is too small to show up on the radar. It's the sheer volume in these sectors that bloats the sum total into a wet-dream for everyone involved. For example, the whole RIL-RNRL brouhaha is only about Rs.2 difference in price of the gas. The mutual funds have only been unfairly loading funds by 1% for so many years. Personally, the loss to me by the UDF-Congestion Fee oxymoron is no more than a piddly 200 bucks or so. Multiply that by 13 million travelers passing through Bangalore's airport alone. Now, stop drooling.

This "indifference" (of regulators and public opinion) has driven crores of unearned Rupees into the balance sheets of these perennially struggling service companies. Thankfully, we know their books are audited so all the losses must be real. Isn't that so, PwC?


BK Chowla said...

This subject is very close to my heart.
Can I add one more ?
It is three years since the Govt levied education cess.I understand that the total amount collected into the kitty is close to Rs 1,50,000 crores(1.50 lakh crores).
Does any one know as to what ever happened to this meagre amount??
We have reached such heights of corruption that we are no longer ashamed of being amongst the most corrupt nations in the world.

Vidooshak said...

True, indeed, sir. I am sure in some way, I am helping to pay for the next generation of Parliament (since it is all in the dynasty now) at fancy international schools and MBA colleges. So, at least the education cess is being used for education-- even if only MLA/MP children education :-)

Mama - Mia said...

yup yup! its crazy how everyone is out to fleece money and do it in such a way that individual doesnt notice and the watch dogs dont care!