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16 January 2015

POSTMODERN INDIA
Reforms get a pan-Indian boost with the proposed revamp of the moribund Indian postal service

Kumar Anshuman E M A I L A U T H O R ( S )
T A G G E D U N D E R | Narendra Modi | India Pos t
offices | Ins urance Policy
BY

Indian Pos tal Sys tem

Pos t

C ON N EC T IVIT Y

When Sachin Tendulkar play ed his 200th Test match in Nov ember 2013, it was a defining moment in Indian
cricket. To mark the occasion, the Department of Posts issued two new stamps. Stamp collectors across the
country rushed to General Post Offices (GPOs) to secure the stamps for their collections, but stocks ran out,
forcing many to wait for months. Not any more. Part of the rev iv al plans for Indias Department of Posts is a
new scheme to sell stamps online: one need just v isit the India Post section on Snapdeal.com to choose from
v ariety of rare stamp series av ailable on the website.
Stamps, issued solely by India Post, the brand name used by the Department, hav e recorded many historical
moments and honoured stalwarts in many fields. The sector has great sentimental v alue, not to mention
rev enue potential. Miniature works of art, documenting human history and endeav ours, cultures, traditions
and national heritage, postage stamps can be a window to the world, say s Kav eri Banerjee, secretary ,
Department of Posts. The partnership with Snapdeal will enhance the ease of purchasing philatelic stamps
and products on the internet at the click of a button. This is just one of many forthcoming measures; the new
Gov ernment has plans to restructure the existing Department of Posts (DoP), which has been at threat of
turning redundant in the era of mobile telephony and the internet.
Before the telecom rev olution arriv ed, India was a country largely dependent on inland letters and postcards
for communication. Like the Railway s, the DoP connected different regions of India. It was the British who
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shaped the postal sy stemway back in 1854. It was then that a pan-Indian postal serv ice came into existence
for the first time with the merger of the deliv ery networks of more than 650 princely states and British
presidencies. Since then it has become a sy mbol of unity , of ty ing cultures together. In rural India, the
postman was a sy mbol of hope for parents whose sons had left home for work, for y oung aspirants who were
preparing for Gov ernment jobs, and many others. Those from south India might remember the whistle of the
boat-mailthe mobile post office that carried dak daily from Madras to Rameshwaram. Letter writers
sitting outside big-city GPOs would be rushed by labourers at the months end to send a money order and
write a few lines for their family . Many from that era hav e nostalgic stories rev olv ing around a message
deliv ered by the postman, perhaps relating to passing an exam or receiv ing an appointment letter. Post
offices are still there in ev ery nook and corner of the country , but their relev ance has been ov ertaken by the
now ubiquitous cellphones and the internet.
With losses escalating ev ery y ear, the future of India Post has been looking bleak. The biggest questions relate
to how long and to what extent it will be subsidised by the national exchequer. The postcard, which costs 50
paise, is subsidised by Rs 7 ; similarly with other serv ices offered by the postal department, including Speed
Post. In the fiv e y ears between 2009 and 2014, the rev enue receipts of India Post hav e increased at an
av erage rate of 13 per cent from Rs 6,267 crore in 2009- 10 to Rs 10,67 1 crore in 2013-14. On the other
hand, the costs of salaries and pensions, which constitute 91 per cent of the expenditure of the Department,
hav e grown many - fold. The pension bill alone amounts to about Rs 4,000 crore per annum. In the fiv e-y ear
period from 2007 -08 to 2011-12, rev enues earned by the India Post increased by 43 per cent, while its
expenditure went up 96 per cent, resulting in its net deficit increasing four times.
The story of India Post may well seem to be ov er. As many hav e sighed, it would just be a matter of time
beforelike other Gov ernment owned entities such as BSNL and MTNLit is forgotten by the country . But
thats not what the new Gov ernment at the Centre foresees for 150-y ear-old Indian postal department.
Aggressiv e plans are afoot to giv e the Department of Posts a new lease of life, through a series of measures
that include lev eraging its existing network to offer modern serv ices to the common man. Not only that,
Prime Minister Narendra Modi is monitoring the rev iv al plan himself.
The postal network can become a driv ing force [for the] Indian economy just like Indian Railway s, the
Prime Minister has said. The Department of Posts has huge assets across India and way s should be explored
to suitably use these assets for the benefit of the people, he added in a recent speech.
Ev er since the new Gov ernment took charge, a rev iv al plan for the Department of Posts has been accorded top
priority . On 21 August last y ear, a nine-member task force under former Cabinet Secretary TSR Subramanian
was set up to study and make recommendations on how to lev erage the postal network in India and turn it
financially v iable. The task force has members such as TV Mohandas Pai and Professor RH Dholakia of IIM
Ahmedabad. The task force was giv en a timeframe of three months, from September to Nov ember, to
complete its work.
On 4 December last y ear, the task force submitted its report to the Minister of Communications and
Information Technology Rav i Shankar Prasad. The DoP studied the report carefully for a month, and on 6
January it was submitted to the Prime Minister. Hav ing rev iewed the report, Modi has asked for speedy
implementation of the recommendations made by the task force. Accordingly , work has started at multiple
lev els of the DoP and the results could be v isible as early as July this y ear.
+++
The big rev amp plan env isions a heav y but realistic rejig of the DoPs current structure. The Gov ernment is
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working towards turning India Post into a holding company with fiv e subsidiaries working under its banner,
each of them designed to operate as a strategic business unit (SBU) with its own plans and goals. This
recommendation of the task force, borrowed from the corporate world, is aimed at increasing work
effectiv eness and transparency .
India has the largest postal network in the world, with ov er 154,882 post offices (as of March 2014), of which
139,182 (around 90 per cent) are in rural areas. In contrast, China Post, serv ing a territory 2.5 times the size
of India, has only 82,000 post offices and branches. At the time of Independence, there were 23,344 post
officesprimarily in urban areas. Thus, the network has registered a sev en-fold growth since Independence,
with its expansionary efforts focused primarily on rural India. On an av erage, a post office serv es an area of
21.2 sq km and a population of 7 ,17 5 people. No other organisation has such a v ast presence across the
country and still remains connected to the people in one way or another, say s Subramanian. Our report is
not aimed at rev iv al but how to rationalise and reform such a large networked organisation with accurate lastmile connectiv ity .
The biggest reform mov e on the cards is the formation of the Postal Bank of India (PBI), which would work
entirely under India Post. The DoP is already one of the country s largest prov iders of financial serv ices under
its Post Office Sav ings Bank scheme. It has 320 million accounts with deposits of around Rs 6 lakh crore,
second only to State Bank of India, the largest bank in the country . Howev er, in terms of reach, it is way ahead
of SBI. A full-fledged banking licence would enable India Post to make the most of its network in rural areas
and deliv er a range of banking serv ices to people. The PBI would be the best thing that can complement
Prime Ministers Jan Dhan Y ojnaa scheme to add ev ery Indian to the banking sy stem, say s Subramanian.
The Post Master is a highly respected person in rural areas and he is like a mobile [Know Y our Customer
database]. The concept of financial inclusion can only be completed by taking India Post along on this
journey , he adds.
The DoP had applied to the Reserv e Bank of India for a banking licence in June 2013, but it was not approv ed.
Later, in August last y ear, the RBI had said it was up to the Union Gov ernment to take a call on the licence.
Now, the Gov ernment is planning to request the RBI to reconsider the application for a univ ersal banking
licenceand is also drafting legislation to that effect. If push comes to shov e, the Gov ernment may ev en take
the ordinance route, say s sources.
Under the proposed structure, the PBI will offer full banking serv ices, and branches will be opened in all
districts in three y ears. Existing Post Office Sav ings scheme accounts will be turned ov er to the PBI, and post
offices will work as front offices. The task force has proposed an initial inv estment of Rs 500 crore, which the
Centre will fork out. We are already inv esting Rs 7 00 crore for implementing Core Banking Solution
[software] to prov ide banking and money remittance serv ices and access to div erse financial products across
our network, say s Kav eri Banerjee. By December this y ear all the departmental post offices will be on [the]
CBS platform. Apart from that, by December we would install 2,800 ATMs across the country .
Apart from banking, the DoP is also in talks with the Insurance Regulatory and Dev elopment Authority
(IRDA) for permission to set up an independent insurance firm, likely to be called India Insurance. Currently ,
India Post offers two ty pes of life insurance: Postal Life Insurance (PLI), which caters to all segments of
gov ernmental and semi-gov ernmental employ ees, and Rural Postal Life Insurance (RPLI), which cov ers the
general rural public with a special emphasis on weaker sections and female workers. As of March 2014, there
were ov er 5.4 million PLI policies being operated by India Post with an assured sum of Rs 1,02,27 6 crore. The
number of policies under the RPLI scheme is ov er 15 million, with an assured sum of Rs 7 9,466 crore.
Various reports hav e suggested that the full potential of the DoPs insurance schemes is y et to be exploited.
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New products will now be introduced, including crop insurance, insurance for farm equipment and also
insurance policies cov ering accidents. The new entity would be allowed to extend its spectrum of insurance
serv ices through agency agreements or broker licence arrangements. It will also be offering products from
other insurance companies to prov ide customers with extra choice. The new entity is to begin operations by
July this y ear, with an initial inv estment of Rs 100 crore made by the Central Gov ernment.
+++
The third big reform planned relates to exploring new serv ices and the e-commerce market. The v ast
connectiv ity of the postal department would be fully exploited to be a part of the e-commerce boom in the
country , say s Rav i Shankar Prasad. According to the task forces report, the country s e-retail market
increased from Rs 97 8 crore in 2007 to Rs 3,000 crore in 2011. Thereafter, it zoomed at a rate of 68 per cent
per y ear to Rs 14,225 crore in 2014. E-commerce play ers are targeting Indias huge rural market as their area
of growth, which is where India Post can play a big role specifically , by offering last mile deliv ery of
products. It already has an arrangement through a Statement of Intent with Amazon India to deliv er
consignments and collect cash on its behalf. Others, such as Naaptol.com, Telebrands and Rediff.com also use
the serv ices of India Post for deliv ery . India Post had also signed an MoU
with Snapdeal.comand Shopclues.com to work as deliv ery agents. We hav e recommended [extending] the
scope of existing tie ups with e-commerce companies to enable the booking of product deliv ery through India
Post at the time a product is purchased on an e-commerce portal. The customer can simultaneously purchase
and book the deliv ery through India Post, say s Subramanian.
Under the reform plan, another proposal is to create a sn SBU named Logistic Post to cater to all third party eretailing needs. This new entity would generate and control its own rev enue andas expected of a SBU
would function as an independent profit centre. By the plan, it is to begin operations by the end of the y ear.
There is also a proposal to set up an e- commerce portal that allows merchants to sell their products directly
to customers. A pilot project between Snapdeal and India Post began in the Prime Ministers constituency of
Varanasi on 25 December, to draw artisans and weav ers into the e-commerce market. Weav ers can sell their
products directly to Snapdeals customer base by registering themselv es at post offices and dropping their
products there. The products will be then deliv ered by India Post.
Through this partnership, we will take Varanasis weav ers to customers in all corners of the country and
extend this platform to include more weav ers and artisans of our country , say s Kunal Bahl, CEO and cofounder, Snapdeal. India Post is the perfect partner for us as they not only hav e the reach but are also as
committed as we are to preserv e and grow our traditional crafts and weav er ecosy stem.
The task force recommends that the fourth SBU handle distribution of third party products such as bill
pay ment, rail and air ticketing, information facilitation for the public or priv ate sector, application forms and
ov er 300 other such e-serv ices. A post office can act as a super information centre which would prov ide
information on area weather conditions, road usability , traffic conditions, agriculture related and health and
disease information, say s Subramanian. The possibilities are unlimited. Whats required is channelisation of
resources.
Currently , many Gov ernment sponsored social security pay ments such as MGNREGA pay ments and pensions
are being made through post offices. Under the new proposal, there will be a new entity to manage all social
security pay ments as well as other serv ices such as the prov ision of Aadhar cards. This entity will
sy nchronise its operational mechanisms with PBI.
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Apart from offering a bouquet of serv ices, the new India Post would also create a whole lot new jobs. Once
the recommendations are implemented, more than 500,000 direct jobs will be created in three to fiv e y ears,
claims Subramanian. This would giv e an impetus to the PMs plan of prov iding more jobs in rural India.
There was a time when post office employ ees were worried about their future. Now Rav i Shankar Prasad
assures them that not a single person would lose his job. In fact, he say s, the new sy stem would offer
opportunities for existing employ ees to improv e their income.
These changes hav e to take place by the end 0f 2015. If executed as per the plan, it would be a landmark
reform brought about by the Modi Gov ernment.

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