This is what most people be wondering as the government amends the post office bill. The First time that this bill is being amended after almost 100 years, is churning up a lot of unease and questions among consumers and courier industry alike. Indian courier industry with about 2300 players has had a free run so far, severe competition has made sure that the industry is self regulated and the prices remain affordable. By contrast, the Department of Post (DOP) has been a monopoly for many years and operates with an obligation to provide postal service to every Indian citizen. Will the proposed amendment curb a growing industry? Who will gain and who will lose with this amendment is the answer everyone is seeking.
There are a few things that have been the point of contention
1. The amendment regarding carrying articles less than 300gm
The Indian courier industry employs about 10 lakh people on full time equivalent jobs providing time bound services for industries and public. Lot of these organisations operate on a metropolitan/ state level offering point to point delivery of parcels and letters, while others operate at regional, national or International level. The USP of the industry has been to provide time bound, reliable delivery of parcels and letters at a marginally higher rate to customers who can afford it. There are many industries including banks, law firms etc, which depend on such services for delivering letters, negotiable instruments on a daily basis. It has been a very successful proposition and even the DOP realised that and came up with Speed post and Express delivery services. However DOP even with such massive operations could not compete with the local courier company that guaranteed next day delivery to most locations in the metros. This is the basic premise of the argument against the amendment. Unable to compete against the efficient courier operators, DoP now wants to monopolise carrying any "postal-article" the less than 300gm. So does this mean that DOP will guarantee services at the same speed that courier agencies deliver these articles? By monopolising this category, it is denying the industry and public a specific category of service that they have been using so far.
2. The setting up of a body that acts as a regulator of the Industry
Courier services in India started as early as 1977, but they haven't made an impact until recently. The industry is still young and has been operating on a environment where competition has served as a self regulator. The recent amendment proposes to set up a authority to be called the Mail Regulatory and Development Authority that will henceforth act as a regulator of the industry. The courier Industry argues that a regulator would be harmful, whereas the government has promised in their amendment that a regulator in the lines of TRAI which provides more independence to operators would be beneficial to the industry and will help resolve any issues that might arise between consumers and service operators. The answer to whether a regulator would be beneficial can only be a speculation. However a lot of ambiguity exists in the way the functions of the authority has been defined. For eg, some of the functions of this authority would be,
--measures to promote competition and efficiency in carrying on any service relating to carriage and delivery of postal articles and letters. But How? hasn't been defined.
-- standards and quality of service to be provided by the registered service providers and department of Posts; How would the compliance be monitored? is not clear
-- fix terms and conditions of inter-connectivity between the registered service 945 of 1860. providers and the department of Posts;
-- regulate arrangements amongst registered service providers of sharing with the Department of Posts their revenue derived from providing mail related services.
clarity in the functions of the regulator would make sure that a regulator functions more appropriately and ensure consumer interests. On overall, my take is that a
regulator would be beneficial to the industry and the consumers.
3. The fees for renewal and registration of agencies.
The amendment has also includes a one time registration and an annual renewal fee for operators. In addition the amendment also proposes that providers of courier service deposit ten percent of their annual revenues to the government for meeting Universal service obligation ( only for operators with revenues greater than 25 lakhs). There is no justification on the part of government for levying this fee for USO purpose. Given the scales of operation, this fee might eat into the profits of a lot of the operators and could very well lead to unethical practices for accounting. The DOP has to look for alternate sources of revenue rather than levying a renewal fee for operators and sharing the profits. For e.g., most of the courier operators center their operations around large and mid size cities. This leaves out a majority of the rural territory uncompeted. This is where the DOP should leverage their presence by engaging in sub contracting service agreements with the larger service providers. This is a very big market (and opportunity) where cost barriers and scale of economy would make sure that DOP could enjoy near monopoly without any regulation.
In the US, USPS (United states Postal service) operates on a similar model, competing with the local and international courier companies like FedEx, UPS, DHL etc. USPS has much bigger presence in US than any of these companies and compensate for some of the lost revenues in the cities by leveraging their presence in the rural. This is how it works, say if FedEx books a parcel to be delivered from City A to Village B. FedEx has no presence at Village B, but USPS has, So FedEx books the package with USPS for delivery and USPS delivers the package and shares a major portion of the revenue.
Amending a 100 year old bill is definitely going to bring up a lot of controversies, so it is also important that the bill is in line with the needs of the modern day industry and public. Certain changes are welcome, with proper implementation of the bill, the government can definitely deliver consumers a better message at the end of the day.
There are a few things that have been the point of contention
1. The amendment regarding carrying articles less than 300gm
The Indian courier industry employs about 10 lakh people on full time equivalent jobs providing time bound services for industries and public. Lot of these organisations operate on a metropolitan/ state level offering point to point delivery of parcels and letters, while others operate at regional, national or International level. The USP of the industry has been to provide time bound, reliable delivery of parcels and letters at a marginally higher rate to customers who can afford it. There are many industries including banks, law firms etc, which depend on such services for delivering letters, negotiable instruments on a daily basis. It has been a very successful proposition and even the DOP realised that and came up with Speed post and Express delivery services. However DOP even with such massive operations could not compete with the local courier company that guaranteed next day delivery to most locations in the metros. This is the basic premise of the argument against the amendment. Unable to compete against the efficient courier operators, DoP now wants to monopolise carrying any "postal-article" the less than 300gm. So does this mean that DOP will guarantee services at the same speed that courier agencies deliver these articles? By monopolising this category, it is denying the industry and public a specific category of service that they have been using so far.
2. The setting up of a body that acts as a regulator of the Industry
Courier services in India started as early as 1977, but they haven't made an impact until recently. The industry is still young and has been operating on a environment where competition has served as a self regulator. The recent amendment proposes to set up a authority to be called the Mail Regulatory and Development Authority that will henceforth act as a regulator of the industry. The courier Industry argues that a regulator would be harmful, whereas the government has promised in their amendment that a regulator in the lines of TRAI which provides more independence to operators would be beneficial to the industry and will help resolve any issues that might arise between consumers and service operators. The answer to whether a regulator would be beneficial can only be a speculation. However a lot of ambiguity exists in the way the functions of the authority has been defined. For eg, some of the functions of this authority would be,
--measures to promote competition and efficiency in carrying on any service relating to carriage and delivery of postal articles and letters. But How? hasn't been defined.
-- standards and quality of service to be provided by the registered service providers and department of Posts; How would the compliance be monitored? is not clear
-- fix terms and conditions of inter-connectivity between the registered service 945 of 1860. providers and the department of Posts;
-- regulate arrangements amongst registered service providers of sharing with the Department of Posts their revenue derived from providing mail related services.
clarity in the functions of the regulator would make sure that a regulator functions more appropriately and ensure consumer interests. On overall, my take is that a
regulator would be beneficial to the industry and the consumers.
3. The fees for renewal and registration of agencies.
The amendment has also includes a one time registration and an annual renewal fee for operators. In addition the amendment also proposes that providers of courier service deposit ten percent of their annual revenues to the government for meeting Universal service obligation ( only for operators with revenues greater than 25 lakhs). There is no justification on the part of government for levying this fee for USO purpose. Given the scales of operation, this fee might eat into the profits of a lot of the operators and could very well lead to unethical practices for accounting. The DOP has to look for alternate sources of revenue rather than levying a renewal fee for operators and sharing the profits. For e.g., most of the courier operators center their operations around large and mid size cities. This leaves out a majority of the rural territory uncompeted. This is where the DOP should leverage their presence by engaging in sub contracting service agreements with the larger service providers. This is a very big market (and opportunity) where cost barriers and scale of economy would make sure that DOP could enjoy near monopoly without any regulation.
In the US, USPS (United states Postal service) operates on a similar model, competing with the local and international courier companies like FedEx, UPS, DHL etc. USPS has much bigger presence in US than any of these companies and compensate for some of the lost revenues in the cities by leveraging their presence in the rural. This is how it works, say if FedEx books a parcel to be delivered from City A to Village B. FedEx has no presence at Village B, but USPS has, So FedEx books the package with USPS for delivery and USPS delivers the package and shares a major portion of the revenue.
Amending a 100 year old bill is definitely going to bring up a lot of controversies, so it is also important that the bill is in line with the needs of the modern day industry and public. Certain changes are welcome, with proper implementation of the bill, the government can definitely deliver consumers a better message at the end of the day.
1 comment:
there has been so many mixed opinions about this amendment (many voting for 'NO')...
its no doubt that govt. postal service has the widest reach but time and reliability is a big issue here... if the govt. is trying to make money out of this by forcing private players out of the game (in the less than 300 gm category), then my suggestion would be to tax the private players more for these mails which will inturn increase the cost of courier from existing Rs. 5 to Rs. 6 and this would be paid by the customer (and not the courier company). This increase would directly go to the government... (some kind of service and income tax types)...
but if the idea behind the move is to give more employment to govt. postal services, then the govt. postal services should prove their worth in terms of time and reliability....
nice post summarizing the possible amendment and related issues!
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