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Wednesday, January 4, 2012

Will India’s snail mail begin brisk walking with post office reforms and liberalisation?

Will India’s snail mail begin brisk walking with post office reforms and liberalisation?

The government’s plan to tap into India’s vast postal system to reach out to the unbanked population by utilising offices across the country as banks is expected to take some shape this year as the proposal has been sent to the Finance Ministry for its nod.
The idea that 1.55 lakh Post Offices could double up as banks is aimed at aiding the government’s goal of financial inclusion, especially in rural areas. Once implemented, coverage of the country’s banking network will increase three-fold in one stroke.
Around 90 percent of the Post Office branches are in rural areas. In contrast, out of approximately 87,000 bank branches in the country, around 24,000 are in rural India.



A general post office in Bangalore. AFP

Although the idea has been around for a while, Communications Minister Kapil Sibal brought it to centrestage in July. However, before it takes shape, the Acts governing the banking and postal sectors will have to go through major amendments.
“Before applying for a banking licence, there are certain procedures that need to be completed. The work is in progress and the proposal has been submitted to the Ministry of Finance for its nod to go ahead,” a government official privy to the development told PTI.
The year may witness quite a few amendments to the 113- year-old Post Office Act, which are aimed at opening up the sector.
The proposed amendments in The Indian Post Office Act, 1898, include recognising the services of private courier players and bringing them under the regulatory ambit. This will legalise ‘forbidden services’ like sending personal letters through private courier companies.
However, a lot needs to be done within the Department of Posts before reforms are implemented in the sector, as the industry is demanding that the services wing of the DoP should be a separate entity. This could be done along the lines of BSNL, which was hived-off from the Department of Telecom, industry players have said.
During 2011, Sibal made efforts to kick-off reforms in the sector, starting with India Post.
“After many years, we have seen government is ready to listen to industry. Minister (Sibal) has said that no policy decision will be made without taking views of industry. It’s a highly welcome move, but DoP officials are still not ready to open up,” said an industry representative. .
India Post is the biggest postal network in the world, a major portion of which, about 1.4 lakh post offices, are located in rural India.
Sibal had announced a 100-day agenda for revamping the DoP, especially its services. The agenda was designed around objectives assigned under the 11th Five-Year Plan (2007-12).
The agenda included provisions to facilitate round-the-clock transactions by customers through web portals, call centres, ATMs and other tools to modernise and enhance the operational and service efficiency of the government-run ‘India Post’.
Sibal attempted to create an image of modernisation in India Post by launching an e-post office portal with an e-commerce section. He pushed India Post to build partnerships with private players for utilising its capacity. The effort did show some results.
In June, 2011, India Post partnered with apparel retail chain Fab India to provide its customers with the facility to ship their purchases to destinations they want from the store.
The DoP also partnered with state handloom centres to provide logistics services to craftsmen for both national and international destinations.
Built up over the years, its reach in the hinterland caught the government’s attention as a tool to reach out to the masses under public programmes.
The year for the DoP began with a partnership with the UIDAI to deliver Aadhar numbers. In November, the UIDAI roped in TCIL to support India Post, which could not manage the work load in view of inadequate printing facilities at Kolkata and Delhi. India Post was printing about 1.5 lakh Aadhaar cards a day, whereas the UIDAI enrollment was over 10 lakh residents daily in that month.
The DoP was also seen as good option to disseminate wages to people under the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA). However, a lack of capacity and lax management posed questions over its service standards.
A parliamentary Standing Committee on the DoP found a huge gap between the wages disseminated by the DoP and the figures recorded by the Department of Rural development. In 2009-10, the gaps in the data submitted by both departments widened to 13 lakh in terms of total MGNREGA worker accounts and over Rs 1,000 crore vis-a-vis the wages distributed.
During 2010-11, the DRD furnished the data one month later than the DoP. Upon examination, it was found there was a deviation of 29 lakh in respect of the number of accounts and about Rs 1,221 crore in respect of the amount disbursed vis-a-vis the DoP’s figures, the Standing Committee said in its report.
Besides these glitches, a fund crunch left the DoP unable to address urgent and important requirements.
During the 11th Five-Year Plan, the DoP was allocated Rs 2,700 crore for technology upgradation of Post Offices. However, the Expenditure Finance Committee (EFC) restricted this to Rs 2,505.86 crore. The final amount approved two years after commencement of the Plan was Rs 978 crore.
With immense potential and as possibly many hiccups on the way to realising them, 2012 will be the year to watch which way India’s postal system goes.