Russian Post Service set for revamp
Russia’s struggling and inefficient postal service is in for a revamp, with government plans afoot to hike charges and plough the profits back into the system.
From Nov. 10, charges for most services offered by local post offices will rise by as much as 30 percent in what observers say is a last-ditch attempt to save the flagging postal service, which has sought salvation far from its initial mission.
“We are being forced to diversify and seek other sources of income,” said Vladimir Kozlov, deputy director of the Communications Ministry’s Postal Department. “For instance, some rural branches are selling consumer goods like soap or detergent, and [our in-house mechanics] are offering some repair services. Non-traditional services generate some 32 percent of all of our revenues.”
The Anti-Monopoly Ministry sets rates for essential postal services, including delivery of letters, postcards and packages. However, local postal outlets have some leeway when it comes to rates for additional services.
“Those other services allow us to compensate for our losses,” Kozlov said, adding that the Anti-Monopoly Ministry usually boosts rates twice a year.
Russia’s postal service, with some 300,000 employees and a network of about 40,000 offices nationwide, holds a “natural” monopoly, although it competes in some spheres with private courier and parcel services. Last year’s revenues totaled 16 billion rubles ($500 million), while this year income is expected to rise to 20 billion rubles.
But that is barely enough to make ends meet, and postal service officials constantly appeal to the federal government for subsidies. This year, the federal budget allocated 70 million rubles to the postal service and earmarked another 70 million rubles for next year.
According to some estimates, the fee charged for sending a 2-kg parcel covers only half of the actual cost of delivery. Currently, labor costs, which account for half of operating expenses, are extremely low, at about $75 per month per employee; a much-needed wage increase for postal workers would push the service into broader losses.
But consumers, especially those who cannot afford long-distance telephone service, are becoming increasingly frustrated with rate hikes, flooding the Communications Ministry’s Postal Department with complaints every time tariffs go up, Kozlov said.
“All these tariffs hit pensioners’ pockets, and it makes them feel even more isolated,” said Konstantin Morozov, a specialist at Postal Service magazine.
But the government argues that increasing rates is the only way to make the service economically independent. Indeed, attaining financial security is the highest priority for the service, which is also struggling with outdated, deteriorating equipment.
The Communications Ministry is due to submit a restructuring plan to the government in December.
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