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How India Post is managed

April 12, 2005 12:14 IST

There were no streamers floating or champagne corks being popped when India Post celebrated its 150th birthday this year. Instead, the department of posts offered its employees a new set of clothes.

More than a century after they were first introduced, the ubiquitous khaki uniform of postal employees will be finally put to rest. In its place is a more corporate colour -- blue. Delhi's already switched colours; the rest of the country will follow soon.

The corporate hue isn't restricted to the new uniform. Over the past few years, the DoP has been becoming increasingly business-like in its approach to making money.

It's explored -- and initiated -- a number of options, from advertisements on the sides of mail vans and on postcards to accepting payments of utility bills to mailing prasad of various temples across the country.

Last month, the department signed agreements by which it will sell FMCG products and cameras at post offices across the country.

But the DoP's balancesheets are still awash in a red as bright as its post boxes. The deficit in 2004-05 was Rs 1,475 crore (Rs 14.75 billion), up 8 per cent from the previous year; mail traffic has been falling steadily over the years; and expenses are mounting: according to the Union Budget of 2004-05, disbursements were in excess of Rs 5,900 crore (Rs 59 billion).

Are the DoP's efforts enough? The Strategist tossed this question to someone who should know: Thomas Matthew, managing director of UPS Jet Air Express India, the local arm of the world's largest express parcel delivery company.

Postal context

Last month, Kolkata-based consumer goods company Emami announced its distribution arrangement with the DoP to sell consumer goods such as soaps and creams through post offices.

Around the same time a similar agreement was being worked out between the DoP and imaging products major Kodak India. The deal: a pilot project to sell cameras and film rolls at post offices in Sangli and Panvel (in Maharashtra).

For the past couple of years, the post office has also been accepting bills of utility service providers like MTNL and Mahanagar Gas.

With the DoP in talks with major consumer goods manufacturers such as Hindustan Lever, Godrej Consumer Products and Marico Industries, the retail connection is expected to deepen.

All these services are clubbed under Retail Post, which was launched in 1996. By 2002 (the latest year for which figures are available), the revenue from this division had climbed by 79 per cent to touch Rs 21 crore (Rs 210 million). Still, the question remains: why did India Post need to seek new stamping grounds?

Post mortem

The biggest reason is the increasing penetration of fixed and wireless telephones, private couriers and e-mail, which threatened the existence of "snail mail".

"Like the air we breathe, postal services were taken for granted," said K Noorjehan, chief postmaster general, Maharashtra Circle, at a gathering of executives from private and public sector companies, held in March to explore new ways of using the post office as a business opportunity.

The reason for the business-like approach is not difficult to see. DoP officials point out that mail traffic at India Post has been falling by close to 40 per cent over the past decade (although it still processes roughly 14 billion articles every year).

The postal department makes money on only three of the 20 services it offers: competition post cards, foreign mail and insurance (the postal life insurance scheme for individuals in rural areas and government employees).

Back-of-the-envelope calculations indicate that if the DoP earns a combined profit of Rs 28.66 per transaction on the three services (Rs 2 per competition post card; Rs 6 for each international mail; Rs 20.66 on every insurance transaction), it loses Rs 178.98 on the remaining 17 services such as post cards, Speed Post and so on.

It's not as if DoP hasn't tried to stem the bleeding. A few years ago it hiked rates of its products -- but that backfired. The biggest casualty was the competition post card (used for replying to competitions on TV), when its price more than doubled from Rs 4 in 1999 to Rs 10 in 2002.

TV channels switched to toll-free numbers and SMS on mobile phones, which were faster and cheaper. Competition post cards never recovered: consider the volumes in just one circle -- Maharashtra. From close to 48,000 cards in 2002, sales of competition post cards crashed to 7,358 last year.

It's all about the money

Meanwhile, the other services continued to bleed the organisation dry. Consider the composition of mail traffic: close to 90 per cent is unregistered and includes everything from the no-frills post card and inland letters to envelopes.

But the department took a hit on its margins because of these services. For instance, it costs Rs 6.11 to deliver a post card costing Rs 0.50.

Then DoP started accepting advertisements on the backs of postcards. But even that could help only so much: it charges Rs 2 for an ad on a Rs 0.25 "Meghdoot" postcard. In 2002, Media Post, which also includes ads on mail vans and post boxes, earned just Rs 58.2 crore (Rs 582 million), a 4 per cent fall over the previous year.

Perhaps naturally, then, it made sense to focus on higher-end offering such as Speed Post and Business Post. Here the DoP had to learn from past mistakes. Speed Post was launched in 1986 to tackle the intensifying competition from the courier industry, but the service was a slow mover.

"As a public sector product we did not have the flexibility to offer discounts to large clients," points out a DoP official. So, where Speed Post charged Rs 20 for a local courier weighing under 200 gm, private courier services offered competition-killer rates of Rs 5 to Rs 10 for the same service.

Still, Speed Post did brush up its act. From the initial 20-odd offices across India, the service is now available in over 1,000 centres.

Even the earlier restrictions in terms of weight (consignments had to weigh less than 20 kg) have been relaxed and incentives such as insurance for corporate clients thrown in.

As a result, the revenue from Speed Post climbed by 30 per cent from Rs 151.4 crore (Rs 1.51 billion) to Rs 196.5 crore (Rs 1.96 billion) in 2001-02.

Then there's Business Post, which offers end-to-end mailing services such as pasting addresses, franking of envelopes and despatch. It has quickly become the second-largest contributor of revenue (after Speed Post) for business development activities, bringing in Rs 166 crore (Rs 1.66 billion) in 2001-02.

It's helped that the DoP has decentralised business development efforts. Each of the 23 circles have been given targets to strike exclusive business deals.

The Maharashtra circle now accounts for 20 per cent of the total revenues of the DoP -- last fiscal year, it earned a bit over Rs 225 crore (Rs 2.25 billion) from business development activities. That's short of the target of Rs 250 crore (Rs 2.5 billion), but still a growth of nearly 300 per cent in a four-year time-frame.

High network

The DoP is also playing on its strengths. Of its 155,000 post offices, only 16,000 are in urban areas.

In rural areas, the post office already was a savings facilitator that accepted deposits through the Public Provident Fund, Kisan Vikas Patra, monthly income plans and similar savings schemes. So there was no shortage of people visiting the post office.

Using this as a starting point, the DoP moved to be a retail front for private financial service providers.

The first break in business came through Western Union Money Transfer in 2001, when the post office became an avenue through which money orders from across the globe could be remitted.

At present, with 4,000 post offices offering the facility, the post office has become Western Union's largest partner in India -- 40 per cent of its10,000 outlets in India belong to India Post.

The DoP is now designing a backward integration plan, to cover the entire chain from printing to posting of business literature (bills to mailers) and is considering entering into alliances with printing companies.

This will help improve our margins better," says Noorjehan. While Parliament debates on an amendment bill that could give post offices the power to regulate the private courier industry, the DoP is working to become letter perfect.

'Build on existing strengths'

Thomas Matthew, Managing Director, UPS Jet Air Express India

India Post should strive and improve on its core competency, the business of post, to make it successful before it ventures into new services.

There are clear advantages that are waiting to be leveraged. India Post delivers almost 80 per cent of the combined domestic mail and package traffic in the country today, due to its reach in the interiors of India.

It will take a long time for private players to catch up since these companies will never get into providing mail services as a standard offering.

In the US, UPS handles almost as much traffic as the US postal services. But that's after UPS has been in the country for almost 100 years.

In India, however, regional, domestic and international express companies have been around for about 25 years and they have a direct presence only in the metros, with a few thousand centres. Compare this with India Post, which covers the entire country.

To be successful the postal department must ensure that it will deliver to any and all destinations in India the very next day, as far as possible. That service is not available by any standards today, even in the private sector.

Speed Post can be the forerunner "poster boy" for this evolution.

Also, the department should look at the customers' perspective rather than look internally. A confidence-generating measure would be the installation of a system that helps customers track and trace EMS (Express Mail Service) mails in transit.

But this calls for an adequate investment in technology -- an area where India Post has been left behind by the express companies. India Post launched products like Speed Post without the requisite technology support.

It is now trying to correct the back-end infrastructure, when the reverse should have happened.

Some days earlier, the postal department announced its entry into the logistics business. If it continues to look at new horizons without improving on what it already has, the department will continue to lose more money.

Logistics is not a word that everybody understands. It is a much hyped word, but there is more to logistics than just providing one service within the supply chain.

We have also heard of attempts to sell FMCG products and cameras through post offices. This could indirectly send a message to employees that the job they are currently doing is not good enough.

Instead, the post office should instill a sense of pride into its workforce. It has a loyal base of employees, despite paying lower salaries than the private sector. Come rain or shine, the postman delivers mail.

In a what's-in-it-for-me-world, the postman does not really ask, "Why do I do this?" This is because he has a sense of pride in what he does. This is something no organisation can buy. To encourage performance, there should be incentive plans to motivate employees.

And to ensure that employees deliver, revenue targets for each circle are not enough; every post office should have individual profit targets.

The department should project the image of convenient, fast and safe mode of service. Customers must walk in and feel a sense of comfort in a post office.

These centres should emulate the service delivery and ambience of retail outlets such as coffee chains or department stores -- service with a smile.

For additional revenue streams, the move to provide options like advertising on post cards are good ideas, though branding a mail delivery van could dilute the identity of the department. The postal department can also offer services such as licence renewal, payment of bills, road tax collection, insurance policy renewal and so on.

In countries like Malaysia, for such essential services, the first point that comes to mind is the post office, not banks. This is what the Indian postal department should endeavour to achieve.

With reports from Reeba Zachariah

Prasad Sangameshwaran
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