La Poste's plans to enter Indian market blocked
La Poste’s plans to enter the Indian market have run into a roadblock due to opposition from the postal department. GeoPost Group, the express parcel arm of La Poste, plans to tap the Indian market through a joint venture with Continental Air Express.
The Foreign Investment Promotion Board (FIPB) has put the joint venture proposal on hold due to objections from the department of posts. The postal department’s opposition adds yet another twist to the moves to restrict foreign ownership in this segment.
Apart from France, GeoPost has business interests in the express parcel and logistics segment in various countries including the UK, Germany, Russia, Spain, Poland, Greece, Romania and Bulgaria.
In Asia, the La Poste arm has business interests in China and South Korea. GeoPost’s was to take 60 pct stake in the proposed subsidiary while Continental Air Express was to hold the rest.
During recent deliberations at the FIPB, the department of post argued that La Poste is also a member of the Universal Postal Union (UPU) and is required to fulfill universal services obligations (USO) like India Post. Therefore, La Poste cannot poach on the creamy territory of the other, FIPB was informed.
The department has also pointed out that La Poste was a state-owned entity and investment by no such entity has been permitted in India so far. India Post, also a member of UPU, handles low-priced items like post cards and inland letters to fulfill its social obligations. GeoPost, on the other hand, plans to enter courier services like express parcel delivery which command a premium.
The postal department’s argument is that La Poste should also be ready to fulfill social obligations like the USO carried out by India Post. In any case, the department has been threatening to make small letters the monopoly of India Post and impose restrictions on foreign ownership in this sector.
La Poste’s plans to enter the Indian market have run into a roadblock due to opposition from the postal department. GeoPost Group, the express parcel arm of La Poste, plans to tap the Indian market through a joint venture with Continental Air Express.
The Foreign Investment Promotion Board (FIPB) has put the joint venture proposal on hold due to objections from the department of posts. The postal department’s opposition adds yet another twist to the moves to restrict foreign ownership in this segment.
Apart from France, GeoPost has business interests in the express parcel and logistics segment in various countries including the UK, Germany, Russia, Spain, Poland, Greece, Romania and Bulgaria.
In Asia, the La Poste arm has business interests in China and South Korea. GeoPost’s was to take 60 pct stake in the proposed subsidiary while Continental Air Express was to hold the rest.
During recent deliberations at the FIPB, the department of post argued that La Poste is also a member of the Universal Postal Union (UPU) and is required to fulfill universal services obligations (USO) like India Post. Therefore, La Poste cannot poach on the creamy territory of the other, FIPB was informed.
The department has also pointed out that La Poste was a state-owned entity and investment by no such entity has been permitted in India so far. India Post, also a member of UPU, handles low-priced items like post cards and inland letters to fulfill its social obligations. GeoPost, on the other hand, plans to enter courier services like express parcel delivery which command a premium.
The postal department’s argument is that La Poste should also be ready to fulfill social obligations like the USO carried out by India Post. In any case, the department has been threatening to make small letters the monopoly of India Post and impose restrictions on foreign ownership in this sector.
Keeping in mind the reservations of the postal department, FIPB directed that further analysis should be carried out as to whether any approvals have been accorded in the past to a state entity in the courier segment. It further said that USO obligations cast on members of UPU should be ascertained. The proposal was, therefore, deferred.
According to current policy, FDI up to 100pct is allowed in courier services for carrying packages, parcels and other items, but clearance from FIPB is mandatory. The postal department has been insisting during recent times that all FDI clearances are subject to activities being in compliance with the Indian Post Office Act.
Section 4 of the Act states that the privilege of carrying letters vested with the Central government. However, private players, including foreign companies, are now being allowed to carry out this business.
