US presses for no FDI cut in courier services

The United States is lobbying with the Indian government not to reduce the foreign direct investment (FDI) limit in express mail (courier) services from 100 per cent to 49 per cent.

Describing some of the proposals in the draft postal Bill as "pitfalls" that need to be avoided, Geoffrey Pyatt, the charge d'affaires in the US Embassy here, said the provisions would have a negative impact on the express mail and courier industry, as well as upon Indian business and consumers.

Pyatt recently wrote to Communications Minister Dayanidhi Maran on the basis of discussions that the US embassy staff had with the private express mail companies.

"I am particularly concerned about three provisions the department of posts proposes: the reduction in the FDI cap, a mandatory above market price multiplier for packages below 150 gms, and licensing requirements."

The US is the latest to join in criticism of the proposed Indian Post Office (Amendment) Bill 2007.

The Rs 4,000-crore courier industry in India employs nearly 10 lakh people, with hundreds of firms, including global ones like DHL and FedEx which compete with home-grown operators like First Flight Couriers.

A couple of years ago, DHL acquired nearly 80 per cent in BlueDart Express Pvt Ltd. If the FDI change were put in place, DHL would have to reduce its stake.

Pyatt said the proposed rollback of the FDI cap would be the first time that the government will reverse an economic reform measure that has been implemented. This, he added, would send out a negative signal to investors overseas at a time when India is beginning to attract significant FDI inflows. "Once the government of India approves the opening up of a sector to foreign investment, the decision stands and investors need not worry about a reversal in policy later down the road," Pyatt said.

Although the price-multiplier provision, a sort of universal service obligation on courier companies is there in other countries also, the move is aimed at helping the national monopoly "" India Post.

Pyatt feels the draft Bill would actually expand the monopoly. The proposal envisages that courier companies charge 2.5 times that of India Post's 'speed post' tariff and five times regular mail tariff for shipments of 150 gm or less.

The United States has also said that there is no need for a separate regulator for the sector.