Post script

There were no streamers floating or champagne corks being popped when India Post celebrated its 150th birthday this year. Instead, the department of posts (DoP) offered its employees a new set of clothes.

More than a century after they were first introduced, the ubiquitous khaki uniform of postal employees will be finally put to rest. In its place is a more corporate colour "" blue. Delhi's already switched colours; the rest of the country will follow soon.

The corporate hue isn't restricted to the new uniform. Over the past few years, the DoP has been becoming increasingly business-like in its approach to making money.

It's explored "" and initiated "" a number of options, from advertisements on the sides of mail vans and on postcards to accepting payments of utility bills to mailing prasad of various temples across the country.

Last month, the department has signed agreements by which it will sell FMCG products and cameras at post offices across the country.

But the DoP's balancesheets are still awash in a red as bright as its post boxes. The deficit in 2004-05 was Rs 1,475 crore, up 8 per cent from the previous year; mail traffic has been falling steadily over the years; and expenses are mounting: according to the Union Budget of 2004-05, disbursements were in excess of Rs 5,900 crore.

Are the DoP's efforts enough? The Strategist tossed this question to someone who should know: Thomas Matthew, managing director of UPS Jet Air Express India, the local arm of the world's largest express parcel delivery company. Read his analysis, but first, a look at how India Post is reinventing itself.

DOP: PUSHING THE SERVICES ENVELOPE
SERVICE	FUNCTION	CLIENTS
Business Post	End-to-end mailing services such as pasting addresses, franking of envelopes and despatch	UTI, MTNL, ICICI, BSNL, LIC, Income Tax Department, SBI Credit Cards, Mcloud Pharma, Aristo Pharma
Greeting Post	Greeting cards with pre-paid postage stamps priced at Rs 14 to Rs 17	Individuals
Mutual funds	Retail distribution of mutual funds at investment desks at select post offices	IDBI Principal, Prudential ICICI and SBI Mutual Fund
Bonds	Retail distribution of bonds at select post offices	RBI Government Relief Bond, ICICI Safety Bonds, IDBI Flexi
International money transfer service	Remittance of money from more than 185 countries to 4,300 post offices across India	Western Union Money Transfer
Media Post	A post card product called the Meghdoot postcard was introduced to garnering revenues through advertising space on the post card. Selling space on letter boxes and mail vans for advertising	SBI, Bajaj Auto, Maharashtra State Seeds Corporation, BSNL, Navneet Publication, NABARD, Kinetic Engg, National Health Information & Education Bureau, Commissioner of Women & Child Welfare, and SET India (Jassi Jaissi Koi Nahin)
Other services	Retail of Special Raksha Bandhan envelopes to avoid wear and tear of rakhis or sending prasad to subscribers across the country	Individuals, Siddhivinayak temple and Badrinath temple
Philately	Retail of Indian postal stamps	Target audience of four million philatelists (stamp collectors) in the country
Bill Mail Service	Bulk mailing of communication for companies in the nature of a financial statement, bill, monthly account bill, once in 90 days	Reliance Infotech, ICICI, HSBC, Standard Chartered
Retail Post	Sale of products and services at the post offices	Kodak, Emami
Bill collections	Accept bills from utility service providers	MTNL, Mahanagar Gas, cellphone companies
e Post	e-mails reach post offices in rural areas from where individuals can access their mails	Individuals

Postal context
Last month, Kolkata-based consumer goods company Emami announced its distribution arrangement with the DoP to sell consumer goods such as soaps and creams through post offices.

Around the same time a similar agreement was being worked out between the DoP and imaging products major Kodak India. The deal: a pilot project to sell cameras and film rolls at post offices in Sangli and Panvel (in Maharashtra).

For the past couple of years, the post office has also been accepting bills of utility service providers like MTNL and Mahanagar Gas.

With the DoP in talks with major consumer goods manufacturers such as Hindustan Lever, Godrej Consumer Products and Marico Industries, the retail connection is expected to deepen.

All these services are clubbed under Retail Post, which was launched in 1996. By 2002 (the latest year for which figures are available), the revenue from this division had climbed by 79 per cent to touch Rs 21 crore. Still, the question remains: why did India Post need to seek new stamping grounds?

Post mortem
The biggest reason is the increasing penetration of fixed and wireless telephones, private couriers and e-mail, which threatened the existence of "snail mail".

"Like the air we breathe, postal services were taken for granted," said K Noorjehan, chief postmaster general, Maharashtra Circle, at a gathering of executives from private and public sector companies, held in March to explore new ways of using the post office as a business opportunity.

The reason for the business-like approach is not difficult to see. DoP officials point out that mail traffic at India Post has been falling by close to 40 per cent over the past decade (although it still processes roughly 14 billion articles every year).

The postal department makes money on only three of the 20 services it offers: competition post cards, foreign mail and insurance (the postal life insurance scheme for individuals in rural areas and government employees).

Back-of-the-envelope calculations indicate that if the DoP earns a combined profit of Rs 28.66 per transaction on the three services (Rs 2 per competition post card; Rs 6 for each international mail; Rs 20.66 on every insurance transaction), it loses Rs 178.98 on the remaining 17 services such as post cards, Speed Post and so on.

It's not as if DoP hasn't tried to stem the bleeding. A few years ago it hiked rates of its products "" but that backfired. The biggest casualty was the competition post card (used for replying to competitions on TV), when its price more than doubled from Rs 4 in 1999 to Rs 10 in 2002.

TV channels switched to toll-free numbers and SMS on mobile phones, which were faster and cheaper. Competition post cards never recovered: consider the volumes in just one circle "" Maharashtra. From close to 48,000 cards in 2002, sales of competition post cards crashed to 7,358 last year.

It's all about the money
Meanwhile, the other services continued to bleed the organisation dry. Consider the composition of mail traffic: close to 90 per cent is unregistered and includes everything from the no-frills post card and inland letters to envelopes.

But the department took a hit on its margins because of these services. For instance, it costs Rs 6.11 to deliver a post card costing Rs 0.50.

Then DoP started accepting advertisements on the backs of postcards. But even that could help only so much: it charges Rs 2 for an ad on a Rs 0.25 "Meghdoot" postcard. In 2002, Media Post, which also includes ads on mail vans and post boxes, earned just Rs 58.2 crore, a 4 per cent fall over the previous year.

Perhaps naturally, then, it made sense to focus on higher-end offering such as Speed Post and Business Post. Here the DoP had to learn from past mistakes. Speed Post was launched in 1986 to tackle the intensifying competition from the courier industry, but the service was a slow mover.

"As a public sector product we did not have the flexibility to offer discounts to large clients," points out a DoP official. So, where Speed Post charged Rs 20 for a local courier weighing under 200 gm, private courier services offered competition-killer rates of Rs 5 to Rs 10 for the same service.

Still, Speed Post did brush up its act. From the initial 20-odd offices across India, the service is now available in over 1,000 centres. 

INDIA POST VS THE WORLD
Country	Number of post offices	Service area per post office (sq km)
US	38,123	245.85
UK	17,633	13.84
Brazil	12,520	679.87
China	57,135	167.97
Japan	24,760	15.26
India	1,55,295	21.17

Even the earlier restrictions in terms of weight (consignments had to weigh less than 20 kg) have been relaxed and incentives such as insurance for corporate clients thrown in.

As a result, the revenue from Speed Post climbed by 30 per cent from Rs 151.4 crore to Rs 196.5 crore in 2001-02.

Then there's Business Post, which offers end-to-end mailing services such as pasting addresses, franking of envelopes and despatch. It's quickly become the second-largest contributor of revenue (after Speed Post) for business development activities, bringing in Rs 166 crore in 2001-02.

It's helped that the DoP has decentralised business development efforts. Each of the 23 circles have been given targets to strike exclusive business deals.

The Maharashtra circle now accounts for 20 per cent of the total revenues of the DoP "" last fiscal year, it earned a bit over Rs 225 crore from business development activities. That's short of the target of Rs 250 crore, but still a growth of nearly 300 per cent in a four year time-frame.

High network
The DoP is also playing on its strengths. Of its 1.55 lakh post offices, only 16,000 are in urban areas.

In rural areas, the post office already was a savings facilitator that accepted deposits through the Public Provident Fund, Kisan Vikas Patra, monthly income plans and similar savings schemes. So there was no shortage of people visiting the post office.

Using this as a starting point, the DoP moved to be a retail front for private financial service providers.

The first break in business came through Western Union Money Transfer in 2001, when the post office became an avenue through which money orders from across the globe could be remitted.

At present, with 4,000 post offices offering the facility, the post office has become Western Union's largest partner in India "" 40 per cent of its10,000 outlets in India belong to India Post.

The DoP is now designing a backward integration plan, to cover the entire chain from printing to posting of business literature (bills to mailers) and is considering entering into alliances with printing companies.

"This will help improve our margins better," says Noorjehan. While Parliament debates on an amendment bill that could give post offices the power to regulate the private courier industry, the DoP is working to become letter perfect.

              Click here for Thomas Mathew's analysis on India Post

(With reports from Reeba Zachariah)