The challenges for India Post
Background
India Post has the largest network of post offices in the world, 155,669 at the last count, with 89% located in rural areas. It has a history of opening new retail outlets even if income is projected to cover only 15% of costs. The post offices reach every ‘nook and cranny’ in virtually every town and village in India. This is their tradition and their strength. India Post is not currently profitable (its expenses grow as its revenues grow) but there are strong moves by management to try and turn things around.
Before writing this article I spoke to a number of major mailers in India, helped by the fact that my company has an office in Mumbai. All expressed a preference to mail domestically at the second class rate in unsealed envelopes (Bookpost) since the service is cheaper for a 20gm-30gm package than first class by a factor of 40%.
The mail is delivered by India Post reliably in two to three days to the major centres and within up to a week in rural areas. This is good enough, particularly given the current lack of mechanised handling outside the major centres.
Barriers to Direct Mail
The inexorable growth in direct mail volumes is undoubtedly an opportunity for India Post, and it now organises regular meetings with bulk mailers in the country to secure feedback on how to improve its service.
One major problem in the market is India Post’s intractable insistence that any personalised mailing package must be mailed first class post in a sealed envelope at a significant 40% premium.
As I was preparing this article, I picked up the phone to India and spoke about this to the Assistant Postmaster General, Mr. Sutar. I pointed out that even though direct mail may be ‘personalised’ there is nothing ‘private’ about it and it does pick up response rates which would lead to higher direct mail volumes for India Post in the future, especially if it allowed such mailers to use the secondclass (Bookpost) service, which virtually every other postal administration in the world now does through an equivalent service.
Frankly, India Post’s stand on this is an anachronism, although I did not tell Mr. Sutar this. I was not able to anyway because he cut me short and asked me to send him my questions in writing. He then passed me on to a colleague who listened to me for sixty seconds and referred me to India Post’s rules listed on its website. He then said come and talk to us sometime. End of conversation.
This is what the direct mail industry is up against. A huge, obstinate bureaucracy entrenched in the ways it has been doing things for years. All major mailers complain about India Post’s position on personalisation, and the long time (several weeks) it takes for India Post to approve a direct mail package contents, outer envelope content, business reply content etc. etc.
India Post Scores High Points for Reliable Mail Delivery
However, on a positive note, there is widespread support for India Post in terms of mail delivery. The postman is part of the local landscape everywhere in India and knows the names and exact addresses of all the individuals and families in his area. He will even know the names of their children…..The mail does get delivered!
On the other hand, there is unanimous agreement amongst mailers that, whilst local private courier companies may sometimes offer lightweight mail delivery rates which are lower than India Post, you can expect as much as 25% will not be delivered – for reasons we do not have to go into here.
Whilst the direct mail industry is happy to use India Post for ‘front end’ mailings there is a clear preference to use private courier companies for back end fulfilment of products, reward premiums, magazines, books etc. Most private couriers offer an online tracking service and proof of delivery and they compete on rates. They experience less pilferage than India Post.
FedEx, for example, has been a success story in India. It now has 74 retail outlets in 54 Indian cites and recently announced the acquisition of PAFEX, its service provider, with a network covering every city in India. Other major international couriers active in the market include DHL/Blue Dart, UPS and TNT.
Attempts to Restrict Competition
Naturally India Post, through its Speedpost division, would like to increase its share of the courier market, which has been gradually eroded by foreign and local competitors. In typical heavy-handed, juggernaut fashion, India Post tried to use the law to enforce a monopoly on items weighing below 300 gms. When this was blocked by ferocious lobbying from the major express players, it tried instead to enforce a minimum selling price up to a certain package weight. It has also been trying to limit foreign direct investment in the express industry to 49%.
As this article goes to press, we understand India Post will face a watering down of most of these proposals in the revised version of the India Post Office (Amendment) Bill which will be tabled before Parliament in the forthcoming budget session.
Growing Financial Services
One area in which India Post has been increasingly successful is in growing revenues from the financial services sector. This now represents nearly half of all revenues. The Post Office Savings Bank has 160 million account holders and the huge retail network is being used to generate magazine subscriptions, payments, remittances and so on. Post offices even sell application forms to students wishing to enter examinations. With 155,669 retail outlets there have to be many other ways in which India Post can generate fresh revenues through its huge network.
India is now one of the world’s leading economies. India Post needs to accelerate its pace of change if it wishes to become one of the world’s leading posts.
