Creation of business for Indian post offices

If you are in a competitive business and want to make profit, then there are two ways.

1. Be the best service provider
2. Be the only player in the business.

It does not take to have a degree from Harvard to think of this. Most of the firms when faced with this situation, will choose the first way. It is impossible to eliminate others from the business. Not always. A government can indeed go for second step.

What happens when the shoddy, irresponsible, unaccountable and corrupt postal service of department of post, Government of India faces stiff competition from private courier firms? What happens when people prefer the efficient and responsible courier services over the ‘India post’ resulting in dwindling business; consequently no/less profit of India Post? The answer is simple. Government proposes to bring a bill which when turned into law will give exclusive rights to India post to carry letters up to 300 grams. It will be illegal for private courier companies to deal in it. One source estimates that letters up to 300 grams constitute 65% of the postal industry of India, which is around 1 billion USD. This change has been proposed in the new law which will replace the ‘Indian Post Office Act, 1898’.

Letters were always the monopoly of Indian post offices, but courier companies bypassed it by terming the letters as ‘documents’. The act will define letters as any communication produced by written, mechanical, electronic and other means (letter-card, post-card and all envelopes), documents and return answers. Now leaving no loop holes, it went and brought in the 300 gm limit. For rest, the courier companies can now deal in ‘letters’.

So the government found the easiest way to ensure assured business for its postal department. It decided to create a monopoly in the much touted liberal Indian economy. Forget one day delivery time, pickup service or certainty of your letter getting delivered. Prepare to make trips to your dingy local post office, wait for the mighty clerk to find some time to work between the tea/coffee breaks and then make a prayer to God for your letter to be delivered.

Now since government has some of the brilliant brains so it has to give some justification for this step. You think of one and you will get hundred. The private courier companies work only in the creamy sector where they make profit. The government has to fulfill universal service obligation (USO) and hence it needs money for it. So it wants to get all the business from the creamy sector to work in socially undeveloped sectors even if it comes at the expense of common man. This sounds so good and convincing, except for the fact that what happens to the revenue of the government which it gets from so many sources including number of taxes. Is that not sufficient?

Further when there is such a genius concept of USO why not put it to more use. For this USO, the private courier companies will have to part with 10% of their revenue. This 10% no courier company is going to pay from its own pocket. It will cascade down to end customers. What happens to the service tax, which we pay to government each time we use courier services? I am not taking any side but I can’t understand why to have this USO tax and monopoly both? If the business was made exclusive for India post, then why this USO? Or, if this USO surcharge then why the monopoly? What is the real purpose, to gather funds or have a monopoly?

I also don’t understand this recent spurt in USO tax or levy. The taxes which we pay to government are income tax, service tax, sales tax, excise tax etc. Apart from this we pay separate tax for education, highways, USO of telecom and now this USO for postal service. If we have to pay for everything separately, then, why the original taxes? Recently there was proposal to have 500Rs as tax on every flight ticket for this USO i.e. development of air services in smaller/non-creamy cities.

Across the world when governments are privatizing their postal services and opening up the sector, in India they are creating monopoly. What right India has to complain about the protectionist policies of other countries when it itself does the same things. Charity begins at home.

P.S – Since India is a democratic country, the department of post has put up this proposal for views from public. If any one wishes so, they can send their views which might be considered. Please visit this link of department of post for sending your opinion.