Despite the abolition of Dual Tariff by the Foreign Exchange Management Act (FEMA), the system still persists with the travel, airline and hotel industries playing the blame game. Charmaine Fernz presents the views of each player in an effort to unravel the tangle...

A notice served to the ministry of tourism (MoT) by the Reserve Bank of India’s Exchange Control Department dated April 8, 2002, states that: ’Under the Foreign Exchange Management Act (FEMA) of 1999, which came into effect from June 1, 2000, there is no provision which requires a foreign national visiting India to make payment in foreign exchange. The existence of dual tariff, where non-residents are required to pay in foreign currency during their visits to India, is contrary to the FEMA and therefore needs to be withdrawn immediately’. This loud and clear message seems to have fallen on the deaf ears of India’s travel and tourism industry. In no unclear terms, dual tariff has and is still a persistent problem and there is no one to take the blame.

Travel professionals with contrasting views feel that just as the term ‘dual tariff’ suggests, there are ’dual’ advantages and disadvantages. But, one must first understand the interpretation of the dual tariff system, which has even left a number of travel service facilitators confused. It is dual as the dollar has money value, i.e. foreign nationals are charged higher than domestic tourists and pay an equivalent amount in rupees but not in dollars.

The reason cited for such a system by industry sources is that since business has been down for so long, the margin between the dollar tariff and Indian rupee is only five to 10 per cent. Therefore there is no violation of the foreign exchange act.

Explains Niranjan Gupta, treasurer, Travel Agents Association of India (TAAI) - Karnataka Chapter, "To comprehend the local markets during the peak and low seasons, one has to grasp the nuances of the multiple rate system and their discounts on offer. The system in question is not applicable to the dollar rate. Nevertheless, this concept is not something new, it is a government regulation implemented when the foreign exchange reserves were very low. Now, when the reserve is overflowing with dollars, no one seems to be concerned. Initially, no travel or tour operator could charge a rupee from a foreigner since it was a violation against the Foreign Exchange Regulation Act (FERA). However, now they are not only charging in rupees, but also on a dollar tariff. This surely restricts the tourism business in the country."

Does The Need For Dual Tariff Still Exist?
It is often noticed that hotels and airlines still apply the dual tariff system. Their explanation, ‘extra earning through the dollar charge, is about 25 per cent more than the rupee rate’. Going by the trade’s responses, dual tariff has many interpretations in existence. Some of them are::

• The dollar rate is aimed at an international tourist so as to offer him an equivalent feeling which he is aware of in a given country or location.
• Perception plays a significant role. For example, in India, if a fare is quoted at Rs 3,000, in Japan it would be 300,000 Yen. This makes a huge difference when heard or viewed. One common currency avoids such a thought.
• The dual tariff is charged to earn more foreign currency, as this policy will aid the economy.
• Hotels incorporate the dual tariff system for the convenience of international tourists.
• The system exists because it is a standard marketing principle and essentially because the international market can afford to pay better.

Speaking up for the airlines, Kiran Pant, manager - South, Royal Nepal Airlines, says, "The tariff for locals has to be subsidised as their purchasing power is much lower. It is a strategy that helps airlines create a balance on their total revenue. The rate that is charged in dollars, helps make up for the subsidy given to local customers. Surely, there are numerous complains from customers, but, we cannot help it, as this system is a (Nepal) government product. The (Indian) DGCA is answerable as far as the airlines are concerned."

However, Balaji Narayanan, director, Akshaya India Tours and Travels, Chennai feel, "There are certain benefits to the dual tariff system. He also feels that it is not completely true when the government or industry says that a different rate for foreigners increases revenue. There is no justification for it. "When there is an increase in tourist arrivals, this system will only benefit the country. Nevertheless, when there are more international tourists, there are hidden but indirect benefits. For instance, the ‘Visit India’ fare at US $500 for 21 days is cheaper than the normal rates. But then, tourists need to be focused on a particular tour as they do not have the same range of options as those available to the domestic travellers. Also, point-to-point trips are expensive. But with regards to India, we don’t stand a chance as compared to our neighbours Sri Lanka, who
offer extremely standardised rates for airlines and hotels," says Narayanan.

Is This System A ’Trojan Horse’ Situation For Tourists?
The dual tariff system can be perceived to be a situation of a ’glass full or empty’ for most tourists. As Ranjan Abraham MD, Clipper Holidays puts it, when a foreigner comes over and pays in dollars, he usually does not know that an Indian is paying less until and unless he has direct interaction or is made aware. Whatever the case maybe, it surely hampers the image of the industry. Though, these situations may be very minuscule and negligible, but it is not right to over look such situations, as facts like these may convince tourists that they are being fleeced.

Explaining the situation, Tarun Thakral, general manager, Le Meridien, Delhi, says, "This system is certainly not fleecing tourists, because the difference between the dollar tariff and local tariff is not more than five per cent. In addition, the system is more flexible today. If a foreign tourist insists on paying in local currency, it is not a big issue. In a scenario where business is almost down, you welcome the handful of tourists that you receive. You cannot cheat on them. I do not think that dual tariff is an issue at all. In countries that have international currency, dual tariffs do not exist. For example Singapore, Singaporean dollars is an international currency and it sells everywhere whereas Rupees does not. There are countries like Nepal, Pakistan, few African and South American countries where dual tariffs exist because their currency is not international."

After analysing the situation, the question that arises is, does factors like these affect travel? Well, says Taposh Chakraborty, vice-president, The Chancery, Bangalore, "The difference in currency rates is not that huge. So, I surely don’t think that there’s a substantial percentage of people who restrict themselves to visiting a country just because of a dual tariff structure. When a foreigner decides to travel, he already has his budget fixed and plans in place. Besides, these days you have enough websites that provide details much in advance so that one could plan their trip accordingly."

Reiterating this, Ravi Kalra, managing director Travel Inn (India) P Ltd, Delhi says, "Nowadays, the trend of booking has changed and international tourists are deciding on travelling at short notice, the trend for late bookings is growing. The last minute tourist tends to look for best deals in a short time. Once in India, the dual tariff system erodes his confidence as he interprets the lower Indian rupee rate as "could have had a better deal had he booked earlier".

A foreigner pays approximately 15 per cent more than an Indian tourist because of the dual tariff system. So, it becomes very difficult for tour operators to explain these differences. Since tourists have no option they ultimately accept.

Would A Single Tariff Work?
Having comprehended the system and its effects on the industry, is the single tariff a good option? Absolutely says Kalra. "Single tariff makes things much easier and competitive. It also takes the disparity in the tariff away and builds up the confidence level of our foreign tourist. Big chains are giving special rates to foreign tour operators and big Indian players like Kuoni, Thomas Cook etc. But, this is a dangerous trend and encourages the theory of ‘big sharks eating the smaller fish’. Hotels should ideally offer similar special rates to all recognised tour operators. Big tour operators like Kuoni and Thomas Cook by virtue of very special rates offered to them by big chains, under cut the rates offered by smaller operators in the same source market. This results in actual revenue loss for the country besides killing small operators," reveals Kalra.

One must also realise as Lyndon D’Silva, sales manager, GRT Grand, Chennai says, "Today world over, they are doing all kinds of things to encourage inflow of tourists. Here, by the dual tariff system, we are frightening them away. When they are bringing in revenue, I think we should not charge any tax for foreigners. People are flocking to Singapore and Malaysia because of the competitive rates on offer. It is also noticed that dual tariff was applied inconsistently and hotels were often arbitrary in the way they charged their guests. There are a number of five-star properties with published dual tariffs that charge ’Indian rates’ for even foreign tourists." This system creates hurdles in India’s competitiveness especially in the group market as more groups will avoid metros like Mumbai and turn to our competitors for better pricing and value for money.

Reiterating this, Manish Khanna, executive assistant manager, Holiday Inn, Mumbai says, "Dual tariff is something the government has created and they use it for airlines, railways, the Palace On Wheels etc. I would say we are doing it because they are doing it. If they stop it, we stop it! The government should be the first one to insist for all prices to be quoted in Indian rupees like what is done in any other country, where prices are quoted in their local currency. As far as Indian tourism is concerned, it is the taxes and not dual pricing necessarily that creates hurdles. Taxes on tourism are the highest, most irrational and inconsistent. The government needs to have a single tax across the board for tourism. And finally, single tariff will benefit the industry by making the pricing more transparent and probably beneficial to the country that has a stronger currency. But again, India needs to first take care of all the above, taxes, infrastructure and all other problems that we are fully aware of."

(With inputs from Jyoti Koul - New Delhi, Susan George - Chennai, Vyas Sivanand - Bangalore)