Indian Govt Plan to Cap Foreign Investment in Courier Cos May Hit Roadblock
The government’s plan to cap foreign investment in courier companies may hit a roadblock. The commerce ministry is opposed to the foreign direct investment (FDI) related proposal in the Indian Post Office Amendment Bill, after severe opposition from industry. Commerce and industry minister Kamal Nath, who received a letter from the Investment Commission chief Ratan Tata on this issue, has decided to oppose the Bill’s intent to impose a cap on FDI in postal services. At present, there is no such cap.
Ratan Tata has requested that any move to impose limits on FDI in the postal sector must be opposed. Tata has said that a limit on FDI will not be in tune with the spirit of reform. Nath, in turn, is said to have noted that the commerce ministry must oppose this proposal too, in a reply that is now said to be with the Investment Commission.
The Post Office Amendment Bill, 2006 to be introduced in winter session of Parliament, is now set for an indefinite delay. The Bill’s proposals have been controversial from the start since private courier companies, who have a free run of the letter-delivery market, are worried about losing marketshare. The Bill proposes to professionalise IndiaPost, the government-run mail delivery service, but also give the government monopoly over delivering documents that weigh upto 300 grams. This type of letter makes up a lion’s share of courier deliveries in India, leading to resentment among private players.
A cap on FDI proposed by the Bill is also perceived as going against private players’ interest. But Ratan Tata’s letter to the Commerce Minister, which is in synch with the industry viewpoint, could help bring postal sector reforms back on track if it finds government support. “We are happy that industry leaders are thinking on the same lines as we are on the FDI issue. We oppose any limit on FDI since courier companies that have international investment did set up in India only after taking due permission from the government. How can we now roll this back?” says R.K. Saboo, chairman of the Express Industry Council of India (EICI).
EICI has met several government organisations to “make representations” that protest the proposed amendments, which include bringing in an independent regulator. The Investment Commission was among those the EICI met, apart from officials in the Commerce Ministry, Planning Commission, Competition Commission and Ministry of External Affairs. Nath’s sentiments, if they reach the Investment Commission in their present shape, will be the first government reaction to the proposed amendment. That is, apart from the Ministry of Information Technology and Communications, which has tried — and failed since 2001 — to have the Bill cleared due to an absolute lack of consensus.
