Most people prefer to have a courier collect mail for delivery instead of standing in line at the local post office. Hence it is not surprising that India's Department of Posts has been feeling threatened by the courier industry, which is now worth US$800 million in India.
The result of the department's insecurity is a proposal to amend the Indian Post Office Act, 1898 to ban private courier companies from carrying packages that weigh less than 500 grams and to make carriage of this category of parcels the exclusive domain of the Indian Post Office. The proposed amendment also seeks to raise the registration fees for courier companies to about US$2,272, with renewal fees of about US$1,136 a year. In addition, it proposes to impose a surcharge equal to 10% of the gross revenue earned by the courier company, payable to the Universal Service Obligation Fund maintained by the government.
The courier industry is highly labour intensive and annually contributes Rs.5 billion (US$112.5 million) to the government's funds in the form of service tax, along with an additional Rs.2 billion in the form of income tax. Hence, the new proposals would not only put a heavy cost burden on the courier industry but could also deplete tax revenues and result in the loss of thousands of jobs.
According to courier industry representatives, if the proposed amendments are allowed, consumers would be denied the choice of mail delivery service. In addition, if consumers have urgent or time-sensitive documents to send, they would be forced to use the Indian Post Office, which has a reputation for inefficiency and delayed deliveries. Further, a vibrant segment of India's privately-owned express delivery service would be wiped out. The proposed amendments appear to be retrograde step and anti-competitive in an otherwise increasingly liberalized economy.
However, the Department of Posts justifies the proposed amendments by saying that the law makes a critical difference between a letter and a document and gives the state-run department the exclusive right to carry letters. Hence, private couriers are only permitted to carry documents, but since no one quite knows where a document ends and a letter begins, private courier companies have exploited this ambiguity and been carrying everything. This has caused the Department of Posts to lose ground to the private sector, with a consequent loss of revenue for the government. To plug this breach, India's government has come up with the suggestion for an ingenious amendment to the Post Office Act. The idea is that, henceforth, the distinction will be made by weight.
Along the lines of the Telecom Regulatory Authority of India, the government is planning to establish a Mail Regulatory and Development Authority (MRDA) which would regulate postal and courier services to ensure compliance with the terms and conditions prescribed by the government and also provide quality-of-service standards for mail service providers. The MRDA would also conduct a periodic survey of service providers to protect consumer interests.
The proposed MRDA would be an independent authority and would have a single individual as a full-time regulator who would be appointed by the government and would hold the office for a fixed term of three years. The regulator would supposedly also be tasked with ensuring that there is a level playing field between private and government courier services.
The government has defended itself from allegations of hampering the business prospects of private courier service providers by stating that post offices provide universal services by servicing remote areas and villages which are not serviced by private courier companies because such services cannot be provided in a profitable manner. Hence, the government claims that any competitive field for postal services in the country must clearly detail the means by which the Department of Posts would be compensated for the loss-making services it provides as public welfare.
Abhishek Seth, an associate at Titus & Co, assisted with this article.
