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C. Shivkumar

Bangalore , Feb. 9

INDIA Post has become market savvy and proposes to increase its earnings by deploying float funds to reduce dependence on Government support.

Sources said that the Postal Department has approached the Union Ministry of Finance for clearance to park some of its float funds in the Reserve Bank of India Repurchase (Repos) operations or in the money market through some of the Primary Dealers or through the banking intermediaries.

The purpose of this move was to augment its non-postal income. Non-postal revenues comprise 40 per cent of its gross income, approximately Rs 4,200 crore. Non-postal income includes fees realised through sale of passport applications, sale of specialised stamps for competitive examinations and pension administration fees for the defence.

The sources said that the department handles money orders of around Rs 7,000 crore. This comprised the bulk of the float funds with India Post. In addition, there are postal orders, which are approximately 10 per cent of the money order figures. Postal orders are of a slightly longer duration. This is because the payout takes place only when the holder presents it. But postal order usage has been progressively falling since most departmental competitive examinations have switched over to stamps.

Currently, the department is not allowed to park these float funds anywhere. Instead, the funds are held as cash balances with either State Bank of India or any authorised public sector bank by the respective head post offices. These balances are non-interest bearing for India Post, though the banks themselves deploy the funds in call or in the Government securities markets earning returns.

The only privilege available to India Post is that they are allowed to draw the funds on demand. Consequently, earnings on money orders and postal orders are entirely in the form of commissions.

The sources said that if these float funds are deployed in the repos, it would mean an earnings of at least Rs 2.8 crore, assuming its participation in the three-day weekend, the rates are fixed at 4.5 per cent.

The sources said that maximising its non-postal income would allow it to cut the revenue deficit and the need for budgetary support. The revenue deficit is currently estimated to be in the region of about Rs 1,500 crore each year, and the bulk of it is in the form of revenue expenditure. The deficit is funded entirely from the general revenues of the Government.

The sources said that so far the options adopted for containing the revenue deficit were through hiking postal tariffs. But such hikes, the sources added, affected the largest users of postal services, mostly the rural population of the country. Increasing the non-postal income was one solution to reduce the burden of the hike on these categories of users, the sources added. The recent move to begin selling non-life insurance policies was part of this move they added.

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