The Hindu Business Line : Posted to the market

Just when it seemed the Government was spinning back to the days of quotas through the mediation of the Human Resource and Development Ministry, comes the news that some policymakers want to stick to the reform agenda. The Finance Ministry has now allowed the Department of Posts to scout for investment opportunities, including equity, from the next fiscal to shore up its bottomline and raise resources. The Department will be permitted to use about Rs. 10,000 crore from its life insurance schemes. The Ministry hopes to get the Department off budgetary support and make it reduce its fiscal deficit of Rs 1,400 crore . This is surely a welcome move for the Department that has been finally told to put its savings to profitable use. While the amount, Rs 3,500 crore, is small compared to what FIIs or mutual funds invest, yet the participation of a major entity such as the Postal Department should deepen the equity market further.

Though the Department has done creditably in facing the challenges posed by courier services, policymakers have been aware that the largest mail service provider is also a losing proposition with the deficit rising year on year. Its net operating ratio has been negative for years despite budgetary support and revenue growth has not been consistent. Structurally, the Department suffers from high personnel costs, lagging circles and the fact that the door-to-door services of private couriers skim off a sizable share of business. The Department has experimented with public-private partnerships — it has tied up with Kodak to sell film at post-offices, with MTNL to collect bills, and others are on the anvil. It dreams about expanding its narrow, savings bank operation into a full-fledged banking service, but has not won enough official support for that. India Post has a huge network of post-offices of which 89 per cent are in the rural areas. Its expansive network is at once an enviable asset and a haemorrhaging weakness. It does most of its core business in unprofitable areas in which private couriers are yet to penetrate as they have in the urban areas.

The extent of the threat can be gauged from a proposal that surfaced last month within the government of banning private couriers from carrying mail below a certain weight. Mercifully, it has not gained currency. On a more serious level there are plans to corporatise the Department, and set new regulations for the private courier companies. Against this backdrop the Finance Ministry move to allow the Department to invest in the market should imbue the beleaguered India Post with greater responsibility for resource generation. Public sector banks and financial institutions have grown enormously after their umbilical chord to government financing was cut. The largest postal service in the world is in dire need of moving into the 21st century.

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