Sources said the National Security Guard has reported that its commando teams undertook a counter-hijack drill on the jumbo aircraft between September 24-27 and it followed the standard operating procedures before releasing the civil aircraft for regular duties.
However, after the operational drill, there seems to have been an "oversight" by joint agencies involved in rendering the aircraft "safe" and rolling it out for regular passenger flying operations, they said.
The stun grenade, which had no explosive in it but had BSF factory markings, was found on the upper deck business class of Boeing 747-400, which was operating flight AI-965 on Mumbai-Hyderabad-Jeddah route.
Once the dummy grenade was spotted, the aircraft was sanitised and taken to a remote bay and checked by local security personnel and then granted operational clearance.
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A joint team of Air India and the Bureau of Civil Aviation Security is also investigating the incident to arrive at a firm conclusion as to how the incident occurred, official sources said.
Just before landing in Jeddah, they said a box, wrapped in plastic, rolled out from beneath one of the business class seats. The cabin crew saw it and immediately informed the pilot, who informed the Jeddah air traffic control.