Atanu Dey On India's Development

Government Spending on Travel

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One suspects that the government of India spends considerable amounts on its office bearers — bureaucrats and politicians. Although their nominal salaries perhaps don’t amount to much, the costs of the royal perks they enjoy must be pretty large. Many of these perks were meant for the British rulers of India, naturally, and the new rulers saw no reason to not enjoy them as well. What’s good for the white must be good for the browns. Indeed, I also suspect that the perks must have increased.

There’s housing, some of it in the poshest locations in the capital of the country, New Delhi. Some houses are on three-acre lots and must have a market rent of upwards of Rs 50 lakhs a month ($100K). Then there’s travel. That’s expensive and perhaps more expensive than what we can ever reasonably estimate.

A blog post on PRAJATANTRA, “Austerity – A One Act Farce for Every Season,” has some details:

Talking about the austerity measures on travels, it needs to be asked as to what is the actual amount of savings expected to be achieved which would be meaningful to relieve pressure on finances due to drought, which is supposedly the reason for the Austerity. In the first place, the instructions issued last year in June 2008 were expected to be followed with proper monitoring. If the Government claims to be at all serious, it ought to have first told the people in a transparent manner the achievements from the previous austerity instructions. According to Budget estimates for 2009-2010, the travel expenses under the Head Establishment are Rs. 2,506.67 crores, a jump from Rs. 1860.26 crores in the previous year. Of this, the travel expenses of the Ministry of Home Affairs have jumped from Rs. 25.99 crores to Rs. 82.62 crores. The travel expenses estimates of The Cabinet are Rs. 179.22 crores which for some strange reason were only Rs. 17.82 crores in the previous year. (see here) It must also not be forgotten that the Government had ordered in 2005 not one but three aircraft for the travel by the President and the Prime Minister, at a cost of Rs. 937 crores. The first aircraft was delivered in August 2008 followed by the other two and the maiden flight was inaugurated by the President on 1st April 2009. One aircraft is understandable, even two, because we want to project ourselvs as a superpower with such show. But three?

Why I say that it is hard to estimate how much it costs the Indians — most of whom are so desperately poor that they don’t even own a bicycle? Because there are hidden costs. Here’s one example. Air India costs a lot. From John Elliott in a post on Air India writes:

Air India is notionally India’s national carrier, but its real role for decades has been to line the pockets and make life comfortable for those directly involved in its affairs – from ministers and bureaucrats, who get kickbacks on aircraft and other orders and benefit from freebies and powers of patronage, to top executives, pilots and other staff who often don’t work but do block change.

If the airline also carries non-government passengers, that is a bonus for India, but it is not the real reason that those in charge want it to continue flying.

Air India loses money hand over fist. It is true that airlines lose money across the world, and at times the losses are sufficient to drive them out of business. When that happens to private airlines, the shareholders of the airlines lose. That’s your basic fact about the private sector — the shareholders share in the fortunes of the firm and that’s that. But when the government gets into the business of business, any mistakes are paid for not by the managers of the firm but by the general public.

When Air India loses Rs 5,000 crores (around $1,000,000,000) as reports say that it has done over the past year, that is coming straight out of the pockets of the poorest of the poor Indian. I suppose that around 1 percent of the Indian population have ever used Air India’s services. So 99 percent of the rest has paid for the subsidy. I am not saying that the 1 percent wanted that subsidy. What I am saying is that the policymakers in their need to have a personal airline at their disposal have imposed a cost on the Indian public.

There’s absolutely no reason for the government to run airlines. It is not as if the private sector is incapable of operating airlines. Indeed, Air India was once upon a time a private operator.

Now there’s talk of ministers flying economy class. It does not make any difference at all. Even if there is a cost saving — and I am not sure that there will be any — the money saved may amount to about 0.0000001 percent of what the total amount is being spent on them. Reminds me of the idiotic thing they do in California. During drought years, restaurants have little cards on their tables saying that they will not serve water unless requested because they are conserving water. Truth is that the water that is served at restaurants amounts to about one billionth of the amount of water that is consumed in California. Saving one-billionth while turning a blind eye to the 20 percent of th water used to water lawns and wash cars is incredibly silly.