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India Post – the road to recovery

with 6 comments

Image source: http://www.indiapost.gov.in/

India Post is a jewel in the crown of the Government office provided it can be managed well and steered in the right direction.

Some facts

1. India has the largest postal network in the world with over 155333 post offices out of which 89% are located in rural areas.

2. India Post provides 4 different types of services:

a. Communication services (Letters, Post Cards, etc.)

b. Transportation services (Parcel, Logistics Post)

c. Financial services (Savings Bank, Money Order, International Money Transfer Service, Public-Private Partnerships for extending financial service outreach through the post office network, Postal Life Insurance)

d. Premium Value Added Services (Like Speed Post, Business Post, Retail Post)

3. The Post office savings bank is the largest bank in India in terms of network, account and savings deposits. Source: http://indiabudget.nic.in/es2004-05/chapt2005/chap95.pdf

4. The post office faces a strategical challenge due to the prominence of other forms of communication such as electronic mail etc.
 

Financials of India Post

Source: http://www.indiapost.gov.in/

India Post makes an annual revenue of Rs. 50,234.88 million against a net working expense of Rs. 62,333.72 million leaving it with a loss of Rs.12,098.84 million per year. Given that India Post employs 500000 employees (direct and indirect staff), it translates to a loss of Rs. 25000 per employee! In contrast, if we look at figures of the average USPS worker (United States Postal service – http://www.usps.com/), they have an operating revenue of $72650 million and operating expense of $71684 million, leaving them with a net income from operations of about $966 million or close to a billion $. Given they employ a workforce of about 664833 (direct and indirect workforce), their’s translates to about a profit $1452 per employee.

How can India Post be turned around – the road to recovery?

1. Distribution network

First of all, India Post has to utilize its strong distribution network to cater to other services esp. Financial services. Even the country’s largest bank, State bank of India, does not have the kind of reach that India Post has. Make use of this and put it to good effect.

Just today, there was a proposal being mooted to the Ministry of communications by the State Bank of India where they have plans of tying up with India Post to have the post office network to sell its products. Now, this is very good news for India Post and State bank of India due to multiple reasons:

– It is not economically feasible for banks to open branches in rural areas.

– SBI can use its deep pockets to help in upgradation and computerization of the existing post offices to help in them rendering better quality services.  

2. Human resource development

The Indian postal service is a highly human resource intensive organization. It employs more than 234187 regular employees and in addition 286004 grameen dak sevaks who operate in rural areas (both account for over 500000+ employees of India Post). This manpower needs to continuously be trained on the latest of technologies to keep them competitive, motivated. Corporate Governance schemes and methodologies such as following the bell curve to segregate  the organizational manpower into Class A, Class B and Class C players and then getting rid of the bottom 10% through voluntary retirement schemes etc. should be encouraged. There should be a pay for performance scheme built in instead of the regular pay packets being disseminated. Accountability should be brought in to ensure the postal staff maintain the six sigma efficiency as practiced by the Bombay dabbawallas. Productivity improvements (per employee) need to be enhanced once the workforce is trimmed and excess flab taken out.

Calculate and keep track of the Total factor productivity (TFP). In USPS’ case, the TFP has increased for seven straight years. (TFP includes all factors of production and measures the growth in the ratio of resources we use — the inputs — to the products and services they produce — the outputs).

 Also, a key aspect is that India Post has been founded under the aegis of one key aspect – communication. So, let this communication be open and transparent to within the organization and outside it (with proper security measures). This can be done by:

– Developing superior Intranet networks that can help postal staff communicate effectively between themselves and with customers aka the local courier companies. In other words, don’t run away from technology, embrace it. You will see the difference when you make technology work for you. The best way to improve large dispersed networks is to bring in superior means of communication that work in conjunction with the objective of the organization i.e. postal service.

3. New products and thrust on new ways to improve competitiveness in the market

India Post must benchmark itself against competition in such a manner that improves the bottom line. New products esp. in the Financial services space (are India Post’s Postal Financial marts the answer?) need to be brought out into the marketplace. Philatelists need to be encouraged with more of the enthusiasm for them to be avid stamp collectors.

Can India Post be turned around?

Sure, why not? When Indian railways was almost written off, Lalu Prasad Yadav came up with his management techniques to turn the PSU around. India Post needs a similar leader who can connect with the people and change the direction of India’s pride – its postal service!

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Written by Naveen Athresh

June 11, 2007 at 3:36 pm

6 Responses

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  1. Your point on entering Financial services is very pertinent. Imaging the help if somebody from Saudi Arabia is to send the money to a village in Bihar. The bank in Saudi Arabia can send the money to the Indian Postal Network and look there is the postman bringing the money to you at home. Who can match the service.

    DN

    June 15, 2007 at 1:28 pm

  2. Cool…

    Panayotis

    August 14, 2007 at 8:58 pm

  3. Well, there’s one more up India Post’s road to recovery. They will be launching a North-East air courier service on the 29th Aug 2007.

    The state run India Post has brought in its own freight aircraft leased from India’s domestic carrier, Indian airlines, for the carriage of mail, parcel and logistics to the North East amidst increased competition from private courier companies.

    There is less competition on this route so it should hopefully add some muscle to the declining revenues of India Post.

    Naveen

    Naveen Athresh

    August 29, 2007 at 4:23 pm

  4. One needs to read C A G Report and Remarks on the performance of India Post.
    On Test Check it was found that Cash holdings in P O are in excess of limits and No reconcilliation done with bank transactions for 2/3 years No actions taken on Theft and frauds for years.
    It holds vacant lands and does not use the budgeted developement funds
    A Land near Mumbai Airport will fetch over Rs.500 crores.
    Standing Committees recommendations not implimented of Merging and consolidating operating P O’s
    A loss making No Delivery P O in 2006 turns over to profit 7 times over with decrease in business by just changing accounting formula.

    Mukesh Patel

    December 26, 2007 at 10:25 am

  5. […] The loss per employee of India Post is about $1900 per employee for the fiscal 2008-09. This is up from the loss it used to incur per employee exactly two years ago on a similar analysis where it was a loss $520 per employee. Possibly related posts: (automatically generated)Finally, USPS gets it rightiPhone in India shortly/comparison with the BlackberryIndia Post – the road to recovery […]


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