December 25, 2011:
The government is in the process of revamping an archaic postal act that needs to be realigned with the changing realities. In this regard, the Ministry of Communication and Information Technology is contemplating to replace the existing Post Office Act that dates back to 1898, with a new Bill.
A draft Post Office Bill is under consideration of the government. The Department of Posts (DOP) has already put the highlights of the proposed India Post Office Act 2011 on its Web site.
NEED FOR REFORM
There is no doubt that there is a need to reform and modernise the postal sector in India, and the new Postal Bill is an important step in that direction. The government needs to learn some critical lessons from the retail FDI stalemate while implementing changes in the Draft Postal Bill.
At a time when the Prime Minister, himself, is talking about building consensus with all the stakeholders to resolve the vexed issue of FDI in retail, the government should adopt a similar approach in finalising the provisions of the new Postal Bill.
A series of discussion should take place with all the stakeholders in a transparent manner so that a robust legislation can replace the existing act. The government has, so far, only given out the highlights of the provisions of the new Act.
In the interest of the public, it is important that the entire draft of the proposed Bill is put on the Web site for public comments.
EXCLUSIVE PRIVILEGE
From what could be gathered from the DoP Web site, the new Bill proposes to give exclusive privilege to India Post to convey express segment of all articles weighing up to 50gm.
In fact, EMS is not a basic postal service but a premium product. Hence, reservation for EMS is not justified.
Thus, such a restrictive practice is against the requirements of modern trade in an economy which, despite witnessing some slowdown, may still achieve a growth rate of 7 per cent. Thus, implementation of such a clause will inhibit growth.
A recent survey-based study by ICRIER and IIM (Calcutta) on “Facilitating trade and Global Competitiveness: Express Delivery Services in India”, which will be published by OUP in a book format in January 2012, found that the decision of the government to open the ‘reserved area' of 50 gm at a price multiple of twice the India Post EMS will adversely affect all segments of the EDS/courier industry, with the smaller players being affected more.
If the Bill is implemented with the minimum price multiple of twice the government EMS, then small courier companies may have to resort to cost-cutting methods to remain competitive in the domestic market.
To ask private operators to charge twice the Speed Post tariff, to say the least, is totally anti-consumer and a move to institute a government monopoly in the express segment which was hitherto non-existent. There is an apprehension that this will lead to significant job losses in the lower end of the EDS/courier business.
INTERNATIONAL PRACTICE
Also, according to the international practice, the reserved area is only for basic letters and not for express documents and parcels.
Moreover, it is difficult to monitor a reserved area because the courier industry is fragmented and largely unorganised and localised. Hence, this is nothing but an attempt to increase the sphere of the reserved area of the Department of Post. On the contrary, if private couriers are required to charge more than Speed Post, it would only burden the Indian consumer.
The new postal act should be fair and transparent. It should clearly define and distinguish between services, which are treated as USO/reserved and those that can be offered on a competitive basis. The ICRIER-IIMC survey found that currently there is no clear definition of postal and express delivery services in India. As the new Postal Bill proposes to cover all these services, it might lead to some complexity because globally there is a debate whether postal and EDS should be treated within a common framework.
The highlights of the Draft Postal Bill propose a registering authority to license companies in the reserved area.
This is nothing but licensing through the back door.
If that happens, then India Post, which is also providing express services will effectively become the regulator. Moreover, most of the mature markets have moved towards market access regime rather than the regulatory regime.
Intensive discussions with other government departments will definitely help formulate better law. The new regulation has to be futuristic and it should focus on postal reforms rather than monitoring the competitive, high-growth express industry.
To keep pace with the rapid growth, it is imperative that legislations are formed keeping in view the evolving market dynamics.
One of the banes of the Indian economy is that the regulations are often not supportive of market economy principles and hinder future growth prospects. The government should keep this in mind while finalising the Postal Bill 2011.
(The author is a professor at the Indian Council for Research on International Economic Relations.)
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