Indian Public Services – Crying for Change

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.

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29 Responses to Indian Public Services – Crying for Change

  1. Hiren says:

    Very comprehensive and informative article. All this talk of India and China being the next economic superpowers is a hogwash as long as infrastructure and labour problems remain unresolved. One cannot have poor governance and economic development going side by side. The only silver linning in the dark cloud is that states like West Bengal are inviting industy with a promise of Industrial reform. No political party has the guts to take on the trade unions.

    Like

  2. Swapnil Pundle says:

    I’ve noticed one thing for a long time about India Post. I can’t understand why…
    The pace of change at Post offices is pathetic even if you just compare it to other public sector organizations. Organizations like SBI, LIC, BSNL or railways are way ahead of post offices in embracing technology, improving customer service and competing with the private sector.
    Are the unions at railways, SBI, LIC, BSNL etc very different from the post office unions…? I don’t think so.
    Then why are Post offices lagging behind other public sector organizations? I have no answer..

    A small piece of information. Post offices in India do offer financial products big time. Post offices offer money orders, savings account, recurring deposits, MIS, savings schemes like PPF,NSC,KVP etc. Here’s something I got from their website http://www.indiapost.gov.in

    “Post Office Savings Bank has a customer base of 140 Million account holders with annual deposits exceeding Rs. 1,000,000 Million and a branch network of 1,54,000 branches, which is double the size of all banks in the country, put together.”

    Like

  3. Basab says:

    Thanks Swapnil. Deposits compare quite well with SBI’s $93B asset base. although not sure what ‘annual deposits’ means.

    Like

  4. Abi says:

    I don’t say everything is fine with Indian Postal Service. But it is not that bad as pictured in this article. And some of the findings especially regarding computerization are farfetched. Ground realities are different. It is easy to blame.

    Like

  5. rahul says:

    Exactly Abi.
    I had bad impression of postal dept and was worried when the only way i was goint to get my $ cheques was by post. (payment for my ecom activity in US, twice a month).that started in sept 99. since then i must have received more than 160 cheques. Not a single miss.

    Like

  6. Yogesh says:

    If above article is just to provide the data and point of the problem areas then its really a good one.
    But is this the ONLY thing which INDIA needs? (Well, everyone knows the answer) It’s easy to sit back and talk about the issues and prabable solutions (All Fundas). What INDIA require is the “IMPLEMENTATION EXCELLENCE” at grassroot level.

    Running a company of like minded ppl is far too easy than running a biz life Indian Postal Service…isn’t it?

    Warm Regards,
    –Yogesh
    PS: All above are just my personal thoughts, feel free to ignore. 🙂

    Like

  7. Shashikant says:

    Between email and cheap telecom rates, the business of snail-mail is in dire straits.

    Basab, I don’t really agree with your conclusion that snail-mail business is in trouble. On the contrary, I have every reason to believe that it is flourishing.

    Here is the short list of things I receive via snail mail – telephone bill, credit card bill, bank statement, communications from the companies/mutual funds in which I am an investor, magazines, and unsolicited offers from all of these companies. This is the situation when I’ve subscribed to electronic communication wherever possible and asked explicitly not send me any physical mails.

    This is the precise reason that Govt is planning to introduce a bill which bars the private courier companies to deliver letters less than 500gm. It wants to protect its turf.

    While I agree that postal department is still an inefficient giant, during last 4-5 years, there is palpable change in their functioning. Thanks to the political system, there can’t be any external agent for change. That way, Indian Post is doing a “good” job.

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  8. Siddharth says:

    Remember JRD who flew a bag full of mail from Karachi to Bombay.
    What happened to Air India when government took over? It is not surprising that there is enough data against Indian Postal Service. To say that the system is broken is not true. The system works but at heavy expenses. IPS is not listed on NASDAQ, and India has capacity to afford wastage — infact we are the best in this. This does not justify IPS losses but we should know what we are, and what we need to change.

    The only problem with most of government machinery is that there is only a “Enter” and “Add” buttons. There is no “Backspace” or “Delete”. In other words, we dont remove unwanted fat because we cant see it. It shows everywhere – from public sector P&L statements, to babus waistlines.

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  9. Mohan Swaroop says:

    The article is good as far as data part is concerned. But the solutions suggested are a typical corporate type, which are implentable in a company with only profit as a main motive. Government sector is different .

    India has excellent planning etc. on paper. We lack in execution. Everyone in the Government knows about it and there is no shortage of talent in the Government to go for reforms.The question is of political will. See railways where positive results are now there for every one to see.. it is mainly because of non- interference of political set up ( had Laloo been interfering , it would have spelt doom for
    railways) ..
    I would say Government managers are doing a wonderful job within the constraints and that is why when some of them leave for corporate sectors , they turn out to be quite successful.

    Basab you should have worked in government to know it. Do not malign your country and sing praises for Americans.

    Like

  10. Rajesh Kumar says:

    Yes, they do need to modernize. There is no denying that. But which courier company would be able to deliver a letter across the country, from one remote village to another, for five rupees (If you take the post card, you get four of them for a rupee, postage paid). While efficiency is definitely one of the variables, their handicap in not being allowed to charge better rates on account of government control is something that cannot be ignored. To put it in short, the USPS and Indian Post Office are two different animals.

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  11. A trenchant critique of ‘labour flexibility’ is this case-study of Otis Elevators in Mumbai: http://www.rupe-india.org/39/otis.html

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  12. Good article. And now the government wants to ban private couriers and or tax them to death to subsidize such inefficient parasites.

    Like

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  14. prabodha says:

    The face of Indiapost can change lke that of Indianrailways if another laloo heads this deparment.Yes Indians are same everywhere.If they can work hard in a foreign country or in a private company they can also work here.indiapost is providing some important services like banking,insurance,consultancy etc.particularly in the rural areas but it has to do lot more.It should be the technical hobknob for rural india and generalmasses in towns.But the most important thing is that what ever it does,should be done qualitatively and at electric speed.It must restore the faith of old Dakia in people.The reward and punishment policy must placed without any politics in it.I think all these things are not impossible to achieve.Your comments and suggestions are very very topical.Postal department will be able to bring back its old glory.

    Like

  15. A.Ramanathan says:

    I think you are being very unfair just to blame IP.
    There has been lots of improvement,Business innovation and savvines has to come to the core in IP and its ways of working.
    I have friend weho is a publisher of books and sends from Chennai the past 6 years or so to all parts of India,He has been using IP and its Speed Post service and is extremely happy about their working/responce.
    In fact when he started sending through IP a lady from IP use to call on him every week for feedback/improvements/any problems.Then it moved to a fornightly visit and now it is monthly.
    IP is trying now to leverage all its Branches in the B.C towns and rural branches not only for financial products,Rail tickets and even commercial goods.
    They have some extremely good people at all levels of the Organization who are very responsive to ideas and oppurtunities.

    Like

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  17. S. Krishnamoorthy says:

    Dear Sir,
    One of the most informative and analytical piece on India Post. I could read it only today. My hearty appreciation to you.
    You are wrong in one respect. India Post has some “business mail” products (without any legislative/statutory basis). One is “bill mail”. The tariff is Rs.3/- (only three rupees). Account statements, bills without any enclosure alone qualify to be posted under this bill mail. You come and see in Indian Business mail post offices. Banks – both domestic and foreign – mutual fund companies and telephone companies (of all hues) abuse this service by posting millions of personal letters under garb of bill mail (of course, with the active connivance and collusion of corrupt postal staff). India Post looses rupees two for every piece of bogus bill mail. The loss, if probed, will reveal a leakage of revenue of millions of rupees every month.When a poor man on the street has to pay a minimum of Rs.5 for a letter, why these rich and wealthy corporates are allowed a ridiculously low tariff service? The post office cannot lament of millions of rupees of loss after providing such a channel of ‘business mail service’ to corporates. The irony is that these corporates are provided with credit facility for a month or so instead of advance postage being paid.
    Kindly take a close look into this scandalous state of affairs and come out with your analytical article. It will do immense good.

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  20. rajeev says:

    regarding krishnamurthy’s comments- bill mail service is not a pan indian delivery service. bill mail is restricted to delivery within a district or a metro city. this is a response from indiapost i guess to regain the share it had lost to couriers and metros for local business mail. so his contention that it is misused with collusion with postal staff i guess is incorrect.
    indiapost’s biggest strength is its network and it is its weakness too. imagine running a network of 1.5 lakh post offices ( largest in the world) i dont think that such a network with 5 lakh employees could be managed by any organisation without basic strong management. in fact the service also differs with the work ethics of the state concerned. i had always benefitted by excellent service by southern postal network. but when i was working at U.P i found one of my letters did not reach me at all which had a greeting acrd with chime.

    Like

  21. rajeev says:

    to add further
    i had never missed a mail in southern indian postal network and had always seen a very good counter service too.
    indiapost has deposits of around 4 lakh crores as small savings which it collects on behalf of finance ministry. but unfortunately it does not lend the money or manage treasury operations and hence it cannot make a profit on that front too.( how much money one can make on the float alone i wonder) in fact i had heard it gets Rs.100 for each account it holds from ministry of finance. it is pittance compared to the 200 rs i paid for using the counter service of citibank once. suppose if in a remote village some one deposits 20 rs a month for 12 transactions and makes some with drawals imagine the cash management one has to do of transferring the cash to the tresury and other expenses of maintaing the accounts and of transferring money back for any heavy withdrawals.
    i had also read some time back that they have no autonomy to close down unviable branches due to political interference and unionism. if government gives them free hand by making it a corporation they can also improve in the same way as SBI. by the way there is no comparison with railways as indian railways is still a monopoly and the way technology has affected indiapost i think it has not affected railways. they have a separate budget too and they can borrow from other sources but indiapost depends on ministry of finance still for its budget. unless indiapost is made to be profitable and self sufficient they cannot modernise themselves as they would be strapped of cash and would be dependent on finance ministry

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  23. Mukesh Patel says:

    The views are diverse but a point to be raised is earlier it was Post & Telegraph, telegraph was later taken off, likewise Telephone was privatised into Telephone Nigams all went better, why then Indiapost can’t go that way rather then selling tea.

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  24. S. Krishnamoorthy says:

    This is with reference to the comments of Rajeev on Bill Mail Service. He is not correct. BMS is a pan-Indian Service. The two conditions are (1) you should mail a minimum of 5000 pieces at a time (2) The mail should be sorted pincode-wise and handed over to the counter of the post office. The post office has not clearly defined what constitutes communication of personal character. As a result, there is large-scale abuse of this service inflicting enormous loss to the post office.

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  25. sunil says:

    sir
    congrats for this well crafted article. but at the same time i have some points of disagreements. the only reson of the plight of india post is that the IPS cadre is still living in fairy world that everything is fine and the department is doing good. there the lack of courage in the officer cadre to talk of problems let us forget the solution. we often blame the leagal problems for our poor performance. but who stops us form taking decisions for making our premium services a customer’s delight. it is the tendency to not to take decisions that is eating the roots of the service.
    finally we should not forget that the fate of the service will determine the fate of its officers. if the department collpase, we cannot walk away silently. if the dark bhawan does not wake up now, there will be no dark bhawan to work.

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  26. Saumitri says:

    Basab,

    I don’t respect the WSJ too much. Infact I don’t respect much of any of the US based research. Mostly they are out of context.

    I have used USPS. Firstly, its difficult to locate a branch and mostly they are so few that you need to travel miles to get to one. In comparison an Indian post office is easily accessible. In the US, I hardly use USPS – its irrelevant – I use UPS.

    The Indian Postal Service, inspite of its government shackles, actually is pretty efficient. You can actually get a registered letter in 1 or 2 weeks, which is pretty fine. A speed post does reach in 2 or 3 days. Even a normal letter does reach in 2 or 3 weeks. Infact I think the IPS is perhaps the only efficient service we have in India, in comparison to the others.

    Yes a lot needs to be still done, and I have seen many things happening.

    The post office I have been using has upgraded to using computers and I don’t think that computers sitting near the stove is the general scenario. The “angrez” have a habit of taking pictures of cows in the middle of the road when they come to India, and I am not surprised if they highlight computers near the stove as well.

    The private alternative hasn’t been good enough either. Courier companies haven’t been able to push the humble post office out – have they?

    Blue Dart is costly, and only as good as the speed post – not better. And the others like Overnite Express and the local ones are used only by corporates because of their easy collection facility. But they are only as safe as the IPS – not better.

    The problems of IPS, lies elsewhere and is not uncommon to all the other government services. Service orientation has not pervaded the Indian government service consciousness, because they still believe they are His/Her Majesty’s agents who need to rule the common Indian population. If the government services realise that now they are in service of the common man then that is the orientation required. But such a mindset change needs time.

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  27. Basab says:

    This post seems to have a long shelf life. Wonder why?!

    Sunil, agree with you wholeheartedly. The leadership must be held accountable for the lack of change. ‘Dark’ Bhavan indeed!

    Saumitri, my experience with USPS is quite different.

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  29. India says:

    I am thinking this post is very old but as a Indian I am fealing that in this way we will loss many things..

    Like

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