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Scrutiny
  
The red letter day
Privatisation will benefit India Post and also uplift the rural economy
18/09/2008

Change is the only thing constant in the world. Ironically though, we have a natural tendency to fear it. The same is true for India Post. Economic liberalisation and the resulting competition has blessed many industries by pummelling the domestic players into shape. However, India Post remains a stark exception to this trend, and there is no doubt that this anomaly has to change very soon. It has become imperative for Indian Post to exploit fully within its limited resources. We proceed to analyse how reforms in Indian Post can bring a paradigm shift in India. Consider this: India’s largest commercial bank, the State Bank of India (SBI) achieved a total turnover of approximately Rs.9 trillion (over $200 billion) with only 10,000 branches and the largest private commercial bank ICICI, with a mere 1308 branches, exceeded the total turnover of Rs.12.10 billion in 2007, whereas Indian Post, with over 1,55,000 branches, remains one of the biggest loss makers among state run giants. Instead of being a pride for the nation, it remains more of a predicament for the country.

The concept of postal services was posted in India as early as 1884, but even after over a century of trials and tribulations, Indian Post is still waiting to take off. Since its inception, Indian Post has launched a variety of services from mail handling to banking, insurance, small savings and remittances and has been of great service to the nation, but in none of these fields has it succeeded as expected. Instead, Indian Post is just another example of the stark failure of some of India’s legacy state-run corporations.

India Post comes under the Department of Post, which is a part of the Ministry of telecommunications and Information Technology. With the economic liberalisation, the Indian telecom sector, which also comes under the same umbrella (under the same Ministry), has seen robust growth thanks to privatisation, while India Post is yet to fire. Thus the IIPM Think Tank proposes that the government corporatise, deregulate, and bring more public-private partnerships into India Post to make it a success.
Well, before presenting the proposal in detail, let’s take a look at the journey of privatising state-run postal systems in developed countries. Japan realised the need to privatize its state run postal service in 2005. Post office in Japan plays a far more crucial role for the country than just mail handling. It is one of the biggest banks and life insurance companies of Japan. Almost eighty percent households use post office for their banking transactions and two-thirds of Japanese are insured by Japan Post insurance. The state run Japan Post was also in losses like India Post, but after privatisation and inclusion of key financial services, it witnessed growth and profits. Similarly, Deutsche Post and Netherlands Post (more known as TNT) started excelling after bringing corporatisation and professionalism in organisations. They sold a portion of their share in public to raise funds and increase public & private participations but government remained the majority shareholder. Many private delivery companies have bought shares in these erstwhile government owned service providers. It is notable that Deutsche Post and TNT are currently among the biggest postal service providers in the world. Many European countries including Britain, Norway, Belgium, Denmark, Italy, Sweden and Finland have either initiated privatisation or taken the issue into serious consideration.

Coming to India, the vast reach of India Post, especially in rural India, shows plenty of promises for itself as well as for the economy. Indian Post service has also undertaken banking services and insurance but has not been very successful. Through reforms, it can raise funds and through public & private participation, sell a portion of its share to public or any private courier service providers. It needs to be given complete autonomy and should be corporatised completely. It can run its banking and insurance services in a full fledged manner, while keeping its primary operations intact. It’s Postal Savings bank is an example. Unsurprisingly, it has opened and is maintaining over 11 crore accounts with an outstanding balance of Rs.1.55 trillion, almost half of the State Bank of India’s (SBI) turnover.

By:- B&E
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