POSTMODERN INDIA

Reforms get a pan-Indian boost with the proposed revamp of the moribund Indian postal service

When Sachin Tendulkar played his 200th Test match in November 2013, it was a defining moment in Indian cricket. To mark the occasion, the Department of Posts issued two new stamps. Stamp collectors across the country rushed to General Post Offices (GPOs) to secure the stamps for their collections, but stocks ran out, forcing many to wait for months. Not anymore. Part of the revival plans for India’s Department of Posts is a new scheme to sell stamps online: one need just visit the ‘India Post’ section on Snapdeal.com to choose from variety of rare stamp series available on the website.

Stamps, issued solely by India Post, the brand name used by the Department, have recorded many historical moments and honoured stalwarts in many fields. The sector has great sentimental value, not to mention revenue potential. “Miniature works of art, documenting human history and endeavours, cultures, traditions and national heritage, postage stamps can be a window to the world,” says Kaveri Banerjee, secretary, Department of Posts. “The partnership with Snapdeal will enhance the ease of purchasing philatelic stamps and products on the internet at the click of a button.” This is just one of many forthcoming measures; the new Government has plans to restructure the existing Department of Posts (DoP), which has been at threat of turning redundant in the era of mobile telephony and the internet.

Before the telecom revolution arrived, India was a country largely dependent on inland letters and postcards for communication. Like the Railways, the DoP connected different regions of India. It was the British who shaped the postal system—way back in 1854. It was then that a pan-Indian postal service came into existence for the first time with the merger of the delivery networks of more than 650 princely states and British presidencies. Since then it has become a symbol of unity, of tying cultures together. In rural India, the postman was a symbol of hope for parents whose sons had left home for work, for young aspirants who were preparing for Government jobs, and many others. Those from south India might remember the whistle of the ‘boat-mail’—the ‘mobile’ post office that carried dak daily from Madras to Rameshwaram. Letter writers sitting outside big-city GPOs would be rushed by labourers at the month’s end to send a money order and write a few lines for their family. Many from that era have nostalgic stories revolving around a message delivered by the postman, perhaps relating to passing an exam or receiving an appointment letter. Post offices are still there in every nook and corner of the country, but their relevance has been overtaken by the now ubiquitous cellphones and the internet.

With losses escalating every year, the future of India Post has been looking bleak. The biggest questions relate to how long and to what extent it will be subsidised by the national exchequer. The postcard, which costs 50 paise, is subsidised by Rs 7; similarly with other services offered by the postal department, including Speed Post. In the five years between 2009 and 2014, the revenue receipts of India Post have increased at an average rate of 13 per cent from Rs 6,267 crore in 2009- 10 to Rs 10,671 crore in 2013-14. On the other hand, the costs of salaries and pensions, which constitute 91 per cent of the expenditure of the Department, have grown many- fold. The pension bill alone amounts to about Rs 4,000 crore per annum. In the five-year period from 2007-08 to 2011-12, revenues earned by the India Post increased by 43 per cent, while its expenditure went up 96 per cent, resulting in its net deficit increasing four times.

The story of India Post may well seem to be over. As many have sighed, it would just be a matter of time before—like other Government owned entities such as BSNL and MTNL—it is forgotten by the country. But that’s not what the new Government at the Centre foresees for 150-year-old Indian postal department. Aggressive plans are afoot to give the Department of Posts a new lease of life, through a series of measures that include leveraging its existing network to offer modern services to the common man. Not only that, Prime Minister Narendra Modi is monitoring the revival plan himself.

“The postal network can become a driving force [for the] Indian economy just like Indian Railways,” the Prime Minister has said. “The Department of Posts has huge assets across India and ways should be explored to suitably use these assets for the benefit of the people,” he added in a recent speech.

Ever since the new Government took charge, a revival plan for the Department of Posts has been accorded top priority. On 21 August last year, a nine-member task force under former Cabinet Secretary TSR Subramanian was set up to study and make recommendations on how to leverage the postal network in India and turn it financially viable. The task force has members such as TV Mohandas Pai and Professor RH Dholakia of IIM Ahmedabad. The task force was given a timeframe of three months, from September to November, to complete its work.

On 4 December last year, the task force submitted its report to the Minister of Communications and Information Technology Ravi Shankar Prasad. The DoP studied the report carefully for a month, and on 6 January it was submitted to the Prime Minister. Having reviewed the report, Modi has asked for speedy implementation of the recommendations made by the task force. Accordingly, work has started at multiple levels of the DoP and the results could be visible as early as July this year.

The big revamp plan envisions a heavy but realistic rejig of the DoP’s current structure. The Government is working towards turning India Post into a holding company with five subsidiaries working under its banner, each of them designed to operate as a ‘strategic business unit’ (SBU) with its own plans and goals. This recommendation of the task force, borrowed from the corporate world, is aimed at increasing work effectiveness and transparency.

India has the largest postal network in the world, with over 154,882 post offices (as of March 2014), of which 139,182 (around 90 per cent) are in rural areas. In contrast, China Post, serving a territory 2.5 times the size of India, has only 82,000 post offices and branches. At the time of Independence, there were 23,344 post offices—primarily in urban areas. Thus, the network has registered a seven-fold growth since Independence, with its expansionary efforts focused primarily on rural India. On an average, a post office serves an area of 21.2 sq km and a population of 7,175 people. “No other organisation has such a vast presence across the country and still remains connected to the people in one way or another,” says Subramanian. “Our report is not aimed at revival but how to rationalise and reform such a large networked organisation with accurate last-mile connectivity.”

The biggest reform move on the cards is the formation of the Postal Bank of India (PBI), which would work entirely under India Post. The DoP is already one of the country’s largest providers of financial services under its Post Office Savings Bank scheme. It has 320 million accounts with deposits of around Rs 6 lakh crore, second only to State Bank of India, the largest bank in the country. However, in terms of reach, it is way ahead of SBI. A full-fledged banking licence would enable India Post to make the most of its network in rural areas and deliver a range of banking services to people. “The PBI would be the best thing that can complement Prime Minister’s Jan Dhan Yojna—a scheme to add every Indian to the banking system,” says Subramanian. “The Post Master is a highly respected person in rural areas and he is like a mobile [Know Your Customer database]. The concept of financial inclusion can only be completed by taking India Post along on this journey,” he adds.

The DoP had applied to the Reserve Bank of India for a banking licence in June 2013, but it was not approved. Later, in August last year, the RBI had said it was up to the Union Government to take a call on the licence. Now, the Government is planning to request the RBI to reconsider the application for a universal banking licence—and is also drafting legislation to that effect. If push comes to shove, the Government may even take the ordinance route, says sources.

Under the proposed structure, the PBI will offer full banking services, and branches will be opened in all districts in three years. Existing Post Office Savings scheme accounts will be turned over to the PBI, and post offices will work as front offices. The task force has proposed an initial investment of Rs 500 crore, which the Centre will fork out. “We are already investing Rs 700 crore for implementing Core Banking Solution [software] to provide banking and money remittance services and access to diverse financial products across our network,” says Kaveri Banerjee. “By December this year all the departmental post offices will be on [the] CBS platform. Apart from that, by December we would install 2,800 ATMs across the country.”

Apart from banking, the DoP is also in talks with the Insurance Regulatory and Development Authority (IRDA) for permission to set up an independent insurance firm, likely to be called India Insurance. Currently, India Post offers two types of life insurance: Postal Life Insurance (PLI), which caters to all segments of governmental and semi-governmental employees, and Rural Postal Life Insurance (RPLI), which covers the general rural public with a special emphasis on weaker sections and female workers. As of March 2014, there were over 5.4 million PLI policies being operated by India Post with an assured sum of Rs 1,02,276 crore. The number of policies under the RPLI scheme is over 15 million, with an assured sum of Rs 79,466 crore. Various reports have suggested that the full potential of the DoP’s insurance schemes is yet to be exploited.

New products will now be introduced, including crop insurance, insurance for farm equipment and also insurance policies covering accidents. The new entity would be allowed to extend its spectrum of insurance services through agency agreements or broker licence arrangements. It will also be offering products from other insurance companies to provide customers with extra choice. The new entity is to begin operations by July this year, with an initial investment of Rs 100 crore made by the Central Government.

The third big reform planned relates to exploring new services and the e-commerce market. “The vast connectivity of the postal department would be fully exploited to be a part of the e-commerce boom in the country,” says Ravi Shankar Prasad. According to the task force’s report, the country’s e-retail market increased from Rs 978 crore in 2007 to Rs 3,000 crore in 2011. Thereafter, it zoomed at a rate of 68 per cent per year to Rs 14,225 crore in 2014. E-commerce players are targeting India’s huge rural market as their area of growth, which is where India Post can play a big role— specifically, by offering ‘last mile delivery’ of products. It already has an arrangement through a Statement of Intent with Amazon India to deliver consignments and collect cash on its behalf. Others, such as Naaptol.com, Telebrands and Rediff.com also use the services of India Post for delivery. India Post had also signed an MoU with Snapdeal.com and Shopclues.com to work as delivery agents. “We have recommended [extending] the scope of existing tie ups with e-commerce companies to enable the booking of product delivery through India Post at the time a product is purchased on an e-commerce portal. The customer can simultaneously purchase and book the delivery through India Post,” says Subramanian.

Under the reform plan, another proposal is to create a sn SBU named Logistic Post to cater to all third party e- retailing needs. This new entity would generate and control its own revenue and—as expected of a SBU—would function as an independent profit centre. By the plan, it is to begin operations by the end of the year.

There is also a proposal to set up an e- commerce portal that allows merchants to sell their products directly to customers. A pilot project between Snapdeal and India Post began in the Prime Minister’s constituency of Varanasi on 25 December, to draw artisans and weavers into the e-commerce market. Weavers can sell their products directly to Snapdeal’s customer base by registering themselves at post offices and dropping their products there. The products will be then delivered by India Post.

“Through this partnership, we will take Varanasi’s weavers to customers in all corners of the country and extend this platform to include more weavers and artisans of our country,” says Kunal Bahl, CEO and co-founder, Snapdeal. “India Post is the perfect partner for us as they not only have the reach but are also as committed as we are to preserve and grow our traditional crafts and weaver ecosystem.”

The task force recommends that the fourth SBU handle distribution of third party products such as bill payment, rail and air ticketing, information facilitation for the public or private sector, application forms and over 300 other such e-services. “A post office can act as a super information centre which would provide information on area weather conditions, road usability, traffic conditions, agriculture related and health and disease information,” says Subramanian. “The possibilities are unlimited. What’s required is channelisation of resources.”

Currently, many Government sponsored social security payments such as MGNREGA payments and pensions are being made through post offices. Under the new proposal, there will be a new entity to manage all social security payments as well as other services such as the provision of Aadhar cards. This entity will synchronise its operational mechanisms with PBI.

Apart from offering a bouquet of services, the new India Post would also create a whole lot new jobs. “Once the recommendations are implemented, more than 500,000 direct jobs will be created in three to five years,” claims Subramanian. “This would give an impetus to the PM’s plan of providing more jobs in rural India.”

There was a time when post office employees were worried about their future. Now Ravi Shankar Prasad assures them that “not a single person would lose his job”. “In fact,” he says, “the new system would offer opportunities for existing employees to improve their income.”

These changes have to take place by the end 0f 2015. If executed as per the plan, it would be a landmark reform brought about by the Modi Government.

About The Author

Kumar Anshuman