US aligns with courier companies against India Post

What does Uncle Sam have in common with Kamal Nath's commerce & industry ministry? Both have found meeting ground in opposing the proposed amendments to the Indian Post Office Act – which has given sleepless nights to the courier industry by threatening to turn all packages below 300 grams the exclusive preserve of India Post.

While the US government has indicated that the move would have a bearing on the ongoing services negotiations at the World Trade Organisation (WTO), the commerce & industry ministry's concern is over FDI in the courier segment. While opposition within the government is manageable, officials feel the US decision to champion the case of the courier industry could block the proposed amendments.

The changes, spearheaded by telecom & IT minister Dayanidhi Maran, include a levy of 10% on the turnover of courier companies to subsidise the universal service obligations (USO) of India Post, which serves the remote regions of the country. The changes in law also call for mandatory registration for all courier companies with a registration fee of Rs 25,000 and a renewal fee of Rs 10,000.

While the proposed changes in the Act are being considered, resistance is mounting. Among others, who have opposed to the proposed amendments, are the US-India Business Council, the Express Industry Council of India, Coalition of Service Industries of the US and the Vidarbha Chamber of Commerce & Industry. The American interest in the sector is on account of the booming business of US companies like Fedex in India.

At the WTO, plurilateral request in postal and courier services has been received from the US. India has not made any offer in this sector, the US government has stressed. The proposal to reserve all letters and packaging weighing below 300 grams for India Post has created a perception that the hitherto liberal regime is being restricted, they have argued. The segment that is being reserved for India Post forms a significant chunk of the express courier business, it is felt.

The commerce & industry ministry has conveyed the US concerns to the department of posts for 'appropriate' action while finalising the draft amendments. It is understood that the Coalition of Service Industries of the US has suggested that the weight criteria should be replaced by a price-weight criteria. The council, sources said, had submitted a memorandum to Mr Nath against the proposed changes. Similar representations have been submitted to the minister by the Express Industry Council of India and the Vidarbha Chamber of Commerce and the US-India Business councils.

The commerce & industry ministry has, therefore, urged the department of posts for consultations before the draft amendment is finalised for the consideration of the Union Cabinet. Since courier companies do not operate in remote areas, the market has already been segmented, the ministry feels. On the USO, the ministry feels that India Post should also contribute to the obligation. The proposal is not clear on how frequently courier companies need to renew their registration, the sources said.

While the commerce & industry ministry feels that the proposed changes should take into account the impact on the 10 lakh jobs created by the courier industry, the postal department feels that the revised law would ensure fair wages and stop exploitation of this workforce. Ministry officials are of the view that monopoly for India Post in letter and packages weighing below 300 grams would not be acceptable to the public.

The two arms of the government, therefore, are likely confront each other when the proposed changes are considered by the Union Cabinet.