Future of India Post – Rural Dimension
- Harinder Singh
India
has the largest Postal network in the world with 1,55,618 Post Offices at the
end of the financial year i.e. 31.3.2003 including 1,39,081 Post Offices in
rural areas. At the time of
independence, India had 23,344 Post Offices, which were largely confined to
urban areas and selected villages.
During the last 50 years it has grown almost seven times. On an average, a post office serves an area
of 21.13 sq. km & population of 6,602. At the time when the Indian Postal
Department was set up, only telegraph facilities were available in limited
areas since 1851 and the first Telephone Exchange was set up in Shimla as late
as 1914 with the result that till the first quarter of 20th century
the Postal Department was the only means of communication. All other means of communication other than
telephones which are existing at present like fax, internet, email etc. have
only developed during the last few years.
2. With
such a large network the question invariably is whether such a large network is
beneficial to the common man or
not. If the postal system enables to
ensure optimal utilization of its infrastructure then it can be said that the
network justifies itself, but if the utilization is low then there is a case
for having a re-look at the existing infrastructure particularly in the rural
sector. An analysis of the various
policy initiatives undertaken during the past five year plans would reveal that
the postal planning was based on a number of assumptions which have not
fulfilled expectations as there is a difference between the market demand and
our policy assumptions as the following table will show:
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Sl. No.
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Policy Assumptions
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Reality
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1.
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Whenever a post office is established, it
contributes to the development of the area.
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The reality is that economic development leads to
demand for postal service and not the other
way round. The Postal Services network were to a certain extent
mandatory in the early years of the
20th century but as time passes and rural sector gets linked up to
electronic means of communication including telephone land lines, importance
of development of postal network is continuing to decline except in some
remote, hilly and tribal areas.
Otherwise, development of roads, telephones and local market to
encourage movement of agricultural products has become more important.
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2
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If any
post office is set up then over a period of time its traffic increases till
the post office becomes a profit-earning center.
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As Savoor Committee and Talwar Committee reports
would reveal, a large number of post offices have been opened particularly in
the rural sector without adequate justification and they have not contributed
to the increase in traffic with the result that the traffic has been static
in the large number of rural areas.
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3
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If the State Governments are asked to contribute
to the cost of the post office, then the part of the cost will be
recovered.
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NRC has been paid by some State Governments only
as first installment and thereafter most State Governments have not paid for
NRC thereby contributing the losses.
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4
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As rural post offices are opened, the cost per
post office is minimal and remains static over a period of time.
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The reality is that since DA and other allowances
are being revised continuously the cost per post office continues to grow
even if there is no increase in traffic.
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5
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Post office has a Universal Service
Obligation(USO) and therefore, the Govt. is duty bound to open post offices
wherever they are required.
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The extent to which this Universal Service
Obligation of the nation can be met depends on the health of the economy and
the priorities and one should remember that there is no such thing as free
lunch and somebody has to foot the bill for this USO.
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6
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As number of post offices increase economies of
scale starts working to the advantage of the post office.
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Economies of scales work only when the traffic is
increasing faster than the cost involved but as the traffic is static or
declining the economies of scales will not work.
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7
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There are over 6 lakh villages and it is important
to provide cheap and efficient service to all the villages.
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When many existing Branch Post Offices(BOs) do not
have any traffic, it can be presumed
with certain exceptions that the traffic will not be adequate to
justify opening of more B.Os.
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3. There
is no doubt that the post office has enormous capacity and capability to
provide services because of its unique position but the problems have arisen
due to over blown infrastructure over the years which has not taken into
account the cost involved and the extent to which these costs can be met. During a survey conducted in 1973, it was
noticed that 9 out of 11 Branch Post Offices were opened on the basis of questionable
data, which was only to enable opening of unviable post offices. This problem was compounded by the fact that
during the period starting from III five-year plan, targets were laid down and
there was pressure on Postal Circles to open post offices even when many of
them were not viable. In the 70s,
invariably the targets were received by the Circles in the last quarter of the
financial year and therefore, a number of post offices were opened in great
haste ignoring the economic viability.
This is not to suggest that the infrastructure created is of no use but
it is relevant to have a re-look and to
emphasize on the quality of infrastructure created with a view to ensure that
optimal results are obtained. This is
not very difficult if only we take into account the reality of the
situation.
4. It
needs also to be emphasized that no social purpose will be served by opening
post offices, which do not generate any worthwhile work. Even if there is no increase in the cost,
the cost of operations goes up by 8% per annum as DA on Salary and Pension has
to be paid to the working employees and pensioners as the case may be. There are two ways of approaching this
problem; one is to cut down the cost of operations and the other is to increase
the volume of transaction provided, the business generated is economically
profitable. Though down sizing offers a
real opportunity to cut down the cost, the fixed cost cannot be reduced as
fixed costs account for 90% of the expenditure including cost of salary, pension,
diesel/electricity and rent and other establishment matters. In India, the Department of Posts has no
control over the cost of infrastructure as bulk of the cost comes from the Pay
Commission recommendations and there are well established interrelations with
other Departments in this regard.
Therefore, the possibility of savings on salary and pension is very
limited particularly after 5th Pay Commission which has increased
the cost of operations fairly substantially after 1996. This has resulted in the Department being
out-priced by the private couriers who pay between 1/3rd to 1/4th
the salary of an average Postal Assistant or Postman for courier work. On the other hand, generating traffic is
also challenging because of monopoly culture and mindset prevailing for several
years in the Department. It will take
years to develop a truly competitive culture as we are still being guided by
earlier monopoly culture even when our monopoly is there only on paper. Therefore, there are very real problems both
in marketing postal products and also in affecting savings through down
sizing. Ultimately, both the approaches
will have to be adopted but in addition to the above the criteria for opening
of post offices would have to be revised substantially in accordance with the
post office traffic. The only workable
criteria appears to go by cost and strictly by the work load (minus time spent
on Sub Accounts in the parent office which will not exist if the post office
itself is closed down.) The other two
criteria namely distance and the population are of hypothetical interest only
because if the relevant rural area does not generate any traffic what so ever
then the population and distance are not material. It is pertinent to mention
here that the Indian Post Office Act
1898 confers monopoly on the post office for letter posts, but if letter posts
itself is running into a loss then it is unlikely that the post office can earn
profit. Hence it is essential that the
pricing of the products should be such that it should generate profit as having
a monopoly if at all, in a losing product is of no economic use.
5. Therefore,
it needs to be emphasized that laws of economics/marketing are asserting
themselves over legal monopoly of Post Office created through an Act of
Parliament. All delivery systems are
now being controlled by the market and it is difficult to identify any delivery
system where monopoly has not been eroded through market forces. One can say, that there is complete monopoly
of the State in regard to printing of currency notes but it is also true that
this monopoly has also been eroded by credit cards and ATMs which reduce need
for printing currency as economies are heading towards cashless
transactions.
6. There
are therefore, two alternatives in dealing with the existing situation. The first alternative is to increase rural
traffic although this may also lead to increased loss to the Department as
discussed above and also because a perusal of Table 15 of Annual Report 2003-04
of the Department would reveal that the average revenue earned by the
Department in respect of post card, letter cards, letters, money orders and
speed post are less than the cost involved.
Therefore, an increase in the traffic may actually end up in increased
loss for the Department. The second
alternative is to have an understanding with the Ministry of Finance regarding
the extent of subsidy to be given to the Department as a whole and there after
the Department may be allowed free hand to manage its postal operations in such
a way that the Department is not able to exceed subsidy promised. This may involve either closure of non
remunerative post offices or increase in rates of postal products or out
sourcing postal services in rural areas.
Para 3.2 of the Annual Report 2003-04 of the Department indicates that
Panchayat Sanchar Seva Kendras are useful for retailing some basic services
like sale of stamps and postal stationery.
In this, the cost involved is much less than normal postal system. If Ministry of Finance agrees to this
arrangement then the extent of loss agreed upon can be treated as subsidy for a
specific period as social obligation towards the nation. This is all the more important as there is
no single product – existing or
proposed, which can wipe out the loss sustained by the Department to the
extent of about 1500 crores per annum given the reality that the cost per
employee goes up to the extent of around 8% per annum as DA even when there is
a decline in postal traffic.
7. The
Department has completed 150 years of its existence and at the time when Postal
Department was created it served a very powerful purpose in ensuring linking
all villages, towns and cities. The
traditions, conventions and the initiatives taken by the Department so far
would make any Department proud but it needs to be remembered that the past is
no guide to the future keeping in view the rapid changes in technology,
organizational functions and labour costs involved. Therefore, the Department has to draw upon its proud traditions
but at the same time it would require radical changes in working environment
and traditions because the world of 2004 is very different of the world of
1854. The fact that the old
organizations like Tatas and Indian Army have been able to draw upon good
management practices from the past while developing new initiatives, give hopes
to the Department of Posts to try for a fresh organizational approach.
8. A question which is invariably asked is about what will be the shape
and size of India Posts in the year 2025. Notwithstanding some bold
predictions, it will be very difficult to predict future of any Department
dealing with communication as similar
predictions have not bourn fruit in the past.
Since the pace of technology and availability of cheap technology like
mobile phones, email and money transfer facilities is so fast, it is difficult
to make, any such prediction. However,
as the country entered into development of rural economy which has pumped in
huge money with richer and middle class farmers, there is a likelihood of
increased expenditure on fast moving consumer goods which may indirectly make
an impact on the prosperity of the post offices. The extent to which such prosperity will be affected by such increased expenditure is difficult to
predict. Further, the recent
experiences have show that there is an enormous scope for Rural PLI, Savings
Bank and Savings Certificates in the enforceable future although the extent of
share of rural post will be influenced by the level of competition. We have
seen one Cooperative Bank fail after another but the public confidence in India
Post remains intact and if we are able to improve the quality of services
offered by India Post in rural areas then the gap between revenue expenditure
and cost involved will decline substantially.
9. In
conclusion, it can be said that the
ability of India Post to compete in the rural segment will depend on the extent
with which such new initiatives are pursued with more intensive use of
infrastructure. The decline of the
conventional letter mail is a known phenomena.
This trend is not confined to India Post alone, but other similarly
placed countries also face similar challenges. However, innovative
restructuring, right sizing along with new initiatives may reduce the extent of
financial loss and that is the bottom line all of us have to aim at.
SOURCE : http://www.indiapost.gov.in/PSCIB/
Thanks
NFPE GPO
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