Post offices must turn e-comm facilitators

Beena Saraswathy | Updated on: Mar 23, 2022
Need to diversify: The significance of post offices in communication has been diminishing 

Need to diversify: The significance of post offices in communication has been diminishing  | Photo Credit: Siva SaravananS

They can act as an affordable online platform for MSMEs/start-ups and become delivery partners, too

During the Budget speech, Finance Minister Nirmala Sitharaman announced that all the 1.5 lakh post offices would be brought under the core banking system. This would enable financial inclusion and access to accounts through Net banking, mobile banking, ATMs and provide online transfer of funds between post office accounts and bank accounts.

The Indian Postal Department has played a crucial role in the communication system of the country ever since the establishment of the first post office in Kolkata in 1727. However, the significance of post offices in communication has been drastically diminishing due to changes in the mode of communication.

In this context, it is critical to consider diversifying its operations to more appropriate purposes. One of the unique strength of the Indian postal service is the presence of a post office in every  corner of the country. As per the Annual Report (2020-21) of the Department of Post, , currently there are 1,56,721 post offices in the country, making it the largest postal network in the world. It should be recognised as a distinct public asset and its potential must be exploited in a timely manner.

Post offices can play a critical role in bridging one of the crucial barriers faced by start-ups and MSMEs, that is, the absence of a free online platform and efficient and affordable courier service provider to enter into online trading. Top e-commerce platforms like Amazon and Flipkart charge a variety of commissions, making online trading unviable for many small and medium businesses.

It is impossible to create a new online platform since the existing players are too big, thanks to the presence of a huge number of registered customers and sellers, presence of multi-sided markets and revenue generation from advertisement, and so on. As on December 31, 2021, Amazon has more than 10 lakh registered sellers and over 100 million registered customers in India.

As a result, there exists a huge barrier for the new players to successfully enter into the e-commerce market. The lack of a proper courier network in the country contributes to this barrier. Having presence in across the country, the Indian Postal Department is the ideal option to fill this gap.

Two approaches

The post office can enter into e-commerce in two ways: by expanding shipping and delivery service appropriately; and through maintaining an online platform for trading various products as Amazon and Flipkart do now.

As per the shipping fee structure reported by Flipkart, currently the shipping charges of a product weighing up to 0.5 kg is around ₹44 for intra-city, ₹51 for intra-zone and ₹65 for national level. This will vary as the weight increases. This is in addition to other fees such as marketplace commission (see Table). The Table shows the various fees charged by Flipkart for selling a mobile phone priced ₹10,000. The seller has to pay ₹805 as various charges including GST and the net amount received by him will be only around ₹9,195. These rates vary in other platforms.

Since post offices are spread across the country, a better management of the human resource and infrastructure can be attempted in the first phase to convert them into e-com facilitators. Each post office can be expanded as and when required, which may increase the job opportunities too in the future.

Online services

Online trading platform can be even extended to online services as well since the post office is easily accessible to the general public. Due to its local level reach, post offices can readily handle many services offered by rural workers or the people with less knowledge in using modern technology. For example, there’s a demand-supply mismatch for jobs like coconut tree climbing, tree cutting, painting, and so on. Addressing this would benefit both the customers and the job providers.

Looking back, during the post-Independence days, the public sector played a key role in economic development. Even though many of those units are on the verge of becoming privatised, public investment is essential to promote and sustain competitive markets whenever required.

Having public presence in various crucial services like insurance, banking, defence, it is time to consider public presence in digital markets in the context of Industry 4.0. Rather than withdrawing from all public sector investment, it is critical to bridge such development gaps. A public sector online platform may further induce private investment, especially from the large number of MSMEs and start-ups. Such a move will have a multiplier effect.

The writer is Assistant Professor, Institute for Studies in Industrial Development, New Delhi

Published on March 23, 2022
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