Indian government to restrict India Post's letter monopoly

The Indian government is working towards phasing in competition within the country’s letter mail market, under a draft Post Office Bill currently under consideration. Ministers confirmed last week that they intend a complete overhaul of the country’s postal legislation, rather than merely an amendment to the India Post Office Act laid down way back in 1898.

Top of the list in the new Post Office Bill, which will replace the 113-year-old law, is a gradual opening up of the postal market and phased removal of India Post’s monopoly on letters.

The state-run postal service will see its reserved area narrowed to items under 150g (5.3oz) in weight, except for express mail where the monopoly will be limited to items under 50g (1.8oz).

Registered private sector couriers will be able to carry letters within the 50g to 150g reserved area only if they charge at least double the rates, either for standard or express delivery.

The new law currently proposes to completely phase out India Post’s monopoly on express delivery services within 15 years, and a parliamentary review to determine the future of the reserved area for letters.

Communications minister Shri Sachin Pilot said under the new Post Office Bill, India Post would maintain a universal service obligation (USO) based on a six-day delivery week, with post offices also opening six days each week, except for during holidays.

“USO is defined as the obligation of the Central Government to provide, through the Department of Posts, basic postal services at reasonable access, affordable price and with specified service parameters throughout the country,” said Pilot in a written response to a parliamentary question.

The government will set up a Registering Authority to register private sector courier companies as the market is opened to competition.

Another aspect of the Post Office Bill would allow the state-run postal service to open offices in foreign countries, in order to improve its international mail services, including express and parcel operations, subject to arrangements with foreign postal administrations.

Earlier this month, the Indian government said it was also looking into expanding financial services run by India Post, as a way to improve access to credit within rural areas.

India Post

India Post runs a network of more than 150,000 post offices across a country of 1.2bn people, the largest postal retail network in the world, though its post offices cover just a third of their costs on average.

Established by the 1898 law, India’s postal service was restructured in 1947 , but efforts at reform have largely floundered since them, with legislative proposals failing in 1982 and 2002, while reforms introduced in 2006 did not advance in India’s parliament.

The currently India Post monopoly extends to all letters, though the term “letter” is somewhat open to interpretation under the 1898 law, with as many as 2,500 courier companies delivering items without calling them “letters”, or by including small items within messages to class them as “parcels”.

Private sector companies currently deliver around 7bn of the 16bn items sent in India each year.

Proposals in 2006 had suggested that private sector courier companies provide 10% of their revenues to a central fund to support India Post’s universal service obligation, though effectively the cost would have been passed on to the consumer.