Indian Posts and Courier Services ( S L Rao). March 13 2006

  1. In principle, everyone should pay prices that are free market determined. There should be no subsidies. But even if selling at below costs to some groups of customers is desired by government, it should not be cross subsidized, i.e., the better-off paying for those that are worse off. All the experience of the past has shown that cross subsidies whether through dual pricing or multiple pricing does not lead to the subsidized goods or services reaching the target customers they are meant for and have resulted in large-scale corruption. If a group has to be subsidized it should ideally be given purchasing power, not actual goods.
  2. At the same time we must recognize the context of India. The ideological mind set in India favours a special price support dispensation for the poor, rural and farming customers. We have seen this in electricity, telecommunications, not to speak of products like fertilizers, food grains, kerosene, etc. In every instance there have been inefficiencies and poor delivery. Indian Posts fall into the same category of national “treasures” that serve the lower socio-economic classes. There will be a strong ground swell of support for Indian Posts if it is made to appear that the private sector is taking away its profitable business.
  3. While the courier business is not in fact in direct competition, many people perceive it differently. There must be a carefully planned campaign to convince people that it is not the case. Courier services are costly as compared to ordinary post. Users trust them as being safe and secure, and to deliver in guaranteed time.
  4. The Posts could also develop a product on these lines, apart from Speed Post. The present ‘certificate’ of posting’ could offer a poor man’s courier service and to many more destinations than the present private courier operators are able to. It is an opportunity for a courier operator to enter into partnership with the Posts and offer the service using the Posts infrastructure.
  5. The Indian Posts do serve the poor, rural and remote rural locations. They are served below cost. Since courier services are in the similar business of packet and parcel delivery, they are seen as ‘rich’ and that they must be made to pay for the Posts obligation to serve the poor and rural locations. There is no doubt that

·  The two businesses are not serving the same market,

·  Indian Posts have vast scope to improve efficiency,

·  Cross-subsidies have been proven to be harmful to the industry and do not reach the customers for who they are meant.

6.  At the same time, the courier industry must be prepared to negotiate the simplest and lowest surcharge to subsidize this obligation. The preferred option should be for courier operators to partner or lease the Indian Posts infrastructure to offer these low-end customers, a similar service as to the rest of the courier service market. This market may be very small for a long time and a cess on the courier industry for USO may be unavoidable.

7.  The courier industry might offer to Indian Posts, help and advice to improve costs and returns.

8.  Obviously it must be the effort to prevent the courier industry losing the right to carry packages below 500 gms. We need research to establish the range of weights of the postal materials of the poor, rural and remote customers. It is unlikely to be anywhere near 500gms. That information should be used to counter the proposed Bill.

9.  In addition, the research must establish the real reasons for Indian Posts losing business (internet, SMS, etc).

10.  Top priority must be given to having the Bill sent to Committee for study. The grounds would be that

·  It is anti-competition,

·  Based on wrong premises (that 500 gms is the weight of the packages of the poor and that despite very different rates, the courier services are taking away business from Indian Posts),

·  Would take away a large percentage of the courier industry’s business,

·  A business that employs over one million people,

·  Indian Posts must recognize its new competitors who are internet, SMS, fax, toll free numbers, etc, all based on the new technologies whose costs are falling steeply. Indian Posts have to adjust to these and leverage its capabilities and infrastructure.

11. The courier industry should be careful that it does not get into a public head-on confrontation with Indian Posts. It would be counter productive.