New Postal Act could deal blow to $2-bn courier sector

Will escalate costs, mandate regulator to check malpractices, set standards

In what could significantly raise the operating cost of corporations and have huge implications for the $2-billion Indian courier sector, as well as for individual consumers, the Department of Posts (DoP) is in advanced stages of proposing amendments to the 100-year Indian Postal Act. The amendments, soon to be moved to Parliament for discussion, will mandate courier companies to charge at least Rs 70 for every non-local courier. This is double the minimum Speed Post rate and significantly higher than what courier companies normally charge for small packets.

The changes, vetted by the law ministry, have also proposed setting up a regulator for the sector on the lines of the Telecom Regulatory Authority of India (Trai). Courier companies will also have to set up a mechanism for "grievance redressal, track and trace facility and compensation", a government official told Business Standard on condition of anonymity. The department feels it is servicing many areas such as delivery of letters at a very subsidised cost under the Universal Service Obligation (USO) mandate. However, private players are cannibalising on it by offering services at an equivalent or much cheaper price.

“In the garb of express services, they are providing services they should not be… By the Indian Postal Act, these areas are sole privileges of the postal department under the reserve area,” said the postal official. The department has been trying to push through these changes for several years, but has always met sectoral opposition. This time, too, companies are crying foul about the provisions, calling these monopolistic and anti-competitive. “This would totally fall foul of the Competition Act,” said Vijay Kumar, chief operating officer, Express Industry Council of India.

The department had asked for stakeholder comments in 2011, promising to put the entire draft of the new Bill online for public review, something which hasn’t happened so far, added Kumar. “It is clear DoP wants to shackle the entire industry for its inefficiencies.” If something like this comes into effect, a majority of the small and medium players in the industry will be wiped out of business, having a huge negative impact on downstream employment, said Kumar.

The department has argued that unlike sectors such as telecom, postal services cannot ask private players to contribute towards the USO fund for a larger good as the sector is too unorganised. Internationally, countries such as the US and the UK provide for certain privileges and reserve an area for the national post organisation to make up for the USO fund, where private players have to necessarily charge certain times the rates offered by the national post administrator, said the postal official.

In the plan, the new Act will define letters as anything under 50g and since it is a monopoly of DoP, private players will have to take a licence to operate in that area. More, they will have to charge a minimum of twice the Speed Post rate, which is Rs 35 for all India minus local delivery. “Even for packages which are above 50g, they will have to charge that minimum rate, otherwise, players will exploit the fact that for a 50g package, they will have to charge Rs 70 and a 51g package can be delivered for Rs 10 or Rs 20.”

But the industry has been countering the argument by saying in all countries which have a price multiple to administer USO, the price multiple is always on the lowest weight slab of the letter segment. “A price multiple will only ensure the overall cost for Indian consumers are pushed up.”

Meanwhile, the department is also working on a postal policy, which is expected to come up in the Cabinet soon for approval. The policy, which states the intent of the government to affect all these changes in the Act, will also include the departments’ plans with respect to e-commerce and its proposed banking foray.

Moreover, the department has identified 4,000-5,000 “fly-by-night” operators and plans to check on the malpractices in the sector by appointing a regulator, who will set some “accountability standards along with making sure that operator is registered and provides a minimum level of service,” the official said. The regulator will be an independent officer appointed by the Union minister for communications and information technology, like in the case of Trai.

Kumar also said the need for licensing and registration will bring the sector back to the licence raj era. “…Several steps backward when the government of India is looking at attracting foreign investments into the sector.”

Highlights of draft Post Office Bill

Couriers can carry letters even within 150 gm and 50 gm (the reserve area for India Post) subject to them charging twice the postal rates for letters and twice the rates for express service.

All operators will require registration for providing any type of courier service.

There is no registration fee or license fee.

But license will be required only for reserve area, USO and letter mail of any courier service in India, who shall be called a Registered Courier.

Licensing conditions involve adherence to quality, guarantee relief to customers in case of any deficiency in service and commitment to ensure confidentiality and security of letter.

An Appellate Authority is proposed for redressal of grievances of any person aggrieved by an order of Registration Authority.

 Source : http://www.business-standard.com