An article on the Indian Postal Service in the Wall Street Journal (subscription required) portrays the service so pathetically, it almost reads like a children’s book describing a distant kingdom where everything goes wrong all the time. Unfortunately, this is no fairy tale. It is very, very real.
Here are some damning stats and facts about Indiapost:
1. It employs 550,000 people and loses $300 million a year. That’s a loss of $545 per employee per year – which is pretty close to the per capita income of India ($714 without adjusting for PPP).
2. The productivity of a USPS employee (United States Postal Service) in terms of the number of pieces of mail handled is 15 times greater than their Indian counterpart. Just to underscore that, that is 1400% greater! Also, USPS makes money. Last year it made $ 1.5 B.
3. Indiapost has 155,000 branches. That is one huge network. Compare that with State Bank of India’s 9,100 branches.
4. In the Mumbai main branch post-men have no work after lunch. The management is trying to get them to sell aloe vera and herbal medicines. There is much resistance.
So, there you have it. If you are an urban Indian reading this blog, here’s the bottom line – $300 million of your taxes is going towards a public service that you probably don’t use at all. My father who is 70 doesn’t write letters any more. All his friends and relatives use email. That is, when they aren’t using their cellphones to talk long-distance. Between email and cheap telecom rates, the business of snail-mail is in dire straits.
That is not to say that just because you and I don’t use the postal services nobody does. I would guess that more than 80% of India doesn’t have access to a computer or isn’t willing to go to the trouble of learning how to use it. I don’t know what the figures are on cellphone and fixed-line phone penetration, but there will still be a very large section of the population, especially in the villages that doesn’t have access to or can’t afford a long-distance phone call to stay in touch. For these people, the Indian Postal Service is an essential service. It clearly can’t be shut down.
But can it be run better? Do the tax payers have to suffer silently while the Postal Service loses $300 million a year? Yes and no. But not under the current regime of labour laws.
Most everybody looking at Indiapost as a business will bring up the issue of pricing. That you can’t really run Indiapost like a business because you don’t have control over pricing. Because of political reasons, the cost of postal services like postcards are so low that these services can never be run economically. That is true, but postcards are just one product and shouldn’t prevent the rest of the business from running efficiently.
The truth is that Indiapost is a victim of politics, but not the politics that forces it to keep postcards cheap. It is labour politics that keeps it from changing to meet the challenges of the 21st century. I have written earlier about how important labour reform is to tackle the problems that the Indian economy is going to face. The Indian Postal Service is a living example of how bad things can get without the flexibility to restructure labour. Let me explain.
Let’s imagine that Indiapost was a company that is faced with the environment that it actually faces today. It has the same employees and the same huge network. Email and cheap telecom costs are eroding its revenue base. Let’s also assume that the government regulates the price of a postcard and does not give the company the freedom to price it as it wishes.
The only thing that is different is that the company has the flexibility to retrench labour with a generous, minimum package (let’s say two years’ wages). Also, it can set wages for its employees as it wishes. It can expand or contract any branches it wants and can transfer employees for good business reasons. However, there will have to be regulatory restrictions on removing branches from far-flung rural areas who have no other option.
This is a very realistic situation. A similar situation exists in the US where the FCC regulates the rates charged by the fixed-line phone companies in rural areas. But other than that is left to manage its own business. They also have Trade Unions and a history of poor service.
So if the conditions described above were to come to pass, would our imaginary postal service company still look as hopeless a case as Indiapost looks today? I don’t think so. The management of the company would have a turnaround plan that would look roughly like this:
1. Improve productivity – Examine the reason why productivity is so low. Part of it is bound to be the fact that volume is sharply down but no changes have been made to manpower deployment. Other reasons could be lack of automation or inefficient work methods.
2. Reduce losses – Do a branch by branch analysis of profit and loss and the manpower required to provide services. Some likely conclusions might be that branches in urban areas like Bombay and Delhi are horribly overstaffed. Identify the number of people that are excess. Retrain or retrench.
3. Improve services – You know you are losing business to the courier services. The reasons are probably low reliability of delivery and poor service in both the post office and by the delivery man. Identify measures like computerization and training that can improve service.
4. Introduce new product lines – You have a vast branch network. Take advantage of that. You can offer all kinds of communication services in far flung areas – phone, internet, market and weather information. You can offer financial services. In Japan the postal system is the largest gatherer of personal financial assets in the country. Finally, you can take on the international couriers at their own game. The USPS does it in the US and makes money doing it.
I don’t offer these suggestions as advice on how to improve the financial situation of Indiapost. What I want to illustrate is that this list of actions, or any other reasonable list that one might put together to turn around IndiaPost, simply cannot be implemented. And the single reason for that is that the employees (or rather the Unions) will not permit it.
Quoting from the WSJ article – …the postal union has repeatedly threatened to strike to block plans to reduce the post office’s losses by redeploying its staffers on nonpostal jobs. “We will work hard, but we don’t want more work,” declares Arvind Y. Salvi secretary for the National Union of Postal Employees in Mumbai.
Here’s another one – Two computers, delivered a year ago from the regional headquarters, sit next to the stove, but have never been deployed because no one knows how to use them. “They called employees in one Sunday and taught us for five hours saying ‘This is a computer, push this key, push that key’ but that’s not enough,” says Mr. Salvi. “The postmen don’t even know what email is.”
Sure, blame the training. If that doesn’t work, blame the computer. Anything that gets you from changing the way you work. If an employee can’t be laid off and can’t be rewarded for performance (if there is an evaluation at all) there is no incentive for him to cooperate with any change program. If it weren’t for intractable labour, Indiapost could become a thriving enterprise – providing great services to the public and perhaps even turning a profit. But that’s a big if.
The same scenario is playing out with all Indian public sector companies and public services enterprises. They soak up public funds and provide poor services. The only saving grace is that most of these sectors have private sector competition – airlines, telecoms, banks and postal services all have alternatives to the public sector pachyderms.
Public services in India are being held hostage by labour politics. There are many public services that cannot be privatized (which, by the way, is also held up by labour politics). Indiapost cannot be privatized. Municipal garbage collection, power distribution, water supply, vehicle registration and dozens of other services can’t be privatized (or won’t be for a long time). Citizens should not have to suffer the consequences of one-sided labour policies which result in corruption, poor service and a huge bill to the exchequer.