Wednesday, September 06, 2006

Losing charm of Indian Post



The Indian post which has accompanied each of our life in our prosperity, sorrows; is now undergoing a difficult situation. The Indian post has changed itself according to our changing life. But the change adopted by Indian post is slow. It covers all the towns and almost all the villages of our nation. Now the government is facing trying our different strategies to make this unprofitable organisation to a profitable one. There are many options in front of the government. I would like to discuss some of these options.
1. The first one is allowing Indian post to do retail banking. Here there are many pros and cons. As Indian post has a large network it will reach out all the towns and villages of India. So to provide the banking service to villages can become possible with in a short span of time. Again the Indian post is providing the banking service. It is also considered as one of the safe security to invest in. People have trust in this organisation. The only thing needed is make it core banking organization. It will involve a huge cost. But we need to look at what is happening in banking sector. Banks are preparing themselves to compete with the international bank which are going to enter the Indian market in 2009. Mergers and acquisitions are happening and the government is promoting this to create big banks. It shows that the competition is going to be stiff in this sector. The question is that in this scanario should Indian Post enter in to retail core banking. Is it ready to face the competition? I have serious doubt.
2. Form an article by Atul Cowshish which came in Central Cronicle I got the idea about the subsidy given in this sector. I will confess that I have never imagined such a huge subsidy in this sector. There is a subsidy of over Rs 6 on post card and the letter card has got over Rs 4. But the money order subsidy is staggering: Rs 28.5 per unit. Registered letters cost Rs 16 a unit. These figures are very astonishing. We can imagine the loss accrued by the Indian post. But there is a right solution for this problem. The Indian post gives 38 services ranging from communication, transport, financial to insurance. The Indian post has a wider presence with 1.55 lakhs post offices. The intersting part of it is that 90% of them are in rural area. The competitor of the Indian post is the Courier service. The courier service has greater presence in urban areas rather than in rural. This is an advantage for the Indian post. By going for Private Partnership the indian post can revive itself. Many countries have privatised their postal services. In recent past japan has privatised its postal service.
The Indian post is adopting negative approach by asking for reduction in FDI in Courier Service from 100% to 49%. The courier services are working more hours and are prompt in their services. This is lacking in the Indian post. Again technology has reduced the business of mail. In the present scanario the best solution for the Indian post is "Privatization".