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INDIA POST TO GO HIGH-TECH TO MEET MNC CHALLENGE

By Nantoo Banerjee

 

Believe it or not, the half-a-million-employee-strong postal department of the government of India faces the biggest threat to its 150-odd years’ existence from no other than the world’s largest courier conglomerate, Deutsche Post AG, a $55-billion German behemoth. Already a victim of governmental apathy and the Narasimha Rao-Manmohan Singh-led 1991-92 reform that led to a massive overhaul of the then departments of posts and telecommunications and corporatization of the telecom function leaving the loss-making postal department in the cold, India Post ended 2013-14 with a turnover of only around $1.7 billion (Rs.10,000 crore) leaving a one-billion-dollar (Rs. 6,000 crore) hole in the exchequer’s pocket to cover the revenue deficit. And, now Deutsche Post is breathing down its weak, business-wary, over-aged, wrinkled neck.

 

Deutsche Post DHL, shipping parcels around the world, plans to invest over 100 million Euros (approx. Rs 800 crore) into its India operation over the next two years to create infrastructure and set up fulfillment centres.  Blue Dart is aspiring to play a stellar role in the business, riding the latest e-commerce wave. The German firm also plans to use India to pilot its e-tail business model for Asia Pacific, outlined by Deutsche Post DHL chief executive Frank Appel. Lately, the company’s India business has shown the fastest growth among some 220 markets it serves across the world.  “This region is expected to soon surpass North America and Europe as the biggest online market in the world,” Appel had recently said. Appel is right. Post this Dussehra, domestic e-commerce firm Flipkart reported $100-million (Rs.610 crore) sale on a single day (October 6), all requiring parcel deliveries.

 

To be honest, in the days of pre-paid cell-phone service allowing top-up facilities ranging from Rs.10 and deep rural penetration of cell-phones, the old-fashioned postcard communication and timeless VPP are nearly dead. The department’s function as a small savings collector had gradually lost attraction since 2007 as nationalized banks started offering much higher returns on term deposits in the face of rising inflation. Unlike bank, postal deposit is a one-way traffic entailing no credit facility or overdraft. Any global management consultant would have advised an immediate closure of the department or sale of underutilized high-value fixed assets held by large revenue-starved post offices at prime locations in Delhi, Mumbai, Kolkata, Chennai, Hyderabad and Ahmedabad among others. But, Prime Minister Narendra Modi and Telecommunications Minister Ravi Shankar Prasad seem to have other plans.

 

The government is preparing to arm ‘India Post’ with modern technology supports and new business model to take the latest MNC challenge head on without wasting any more time. The prime minister has already asked a high-powered committee comprising T S R Subramanian, former cabinet secretary, as chairman, and T V Mohandas Pai, Manipal Global Education chairman and former Infosys board member, and G N Bajpai, former chairman of SEBI and LIC, as members, to suggest ways to revamp the organization so that it can reemerge as a strong, economically viable entity leveraging on its unparallel reach and experience. The panel’s prescription is expected by December 31.

 

If the German government’s Bundespost, the promoter and indirect controller of Deutsche Post AG that boasts the world’s largest courier brands DHL and Blue Dart, could take its business to its current height in less than 20 years by reorganizing the system, why can’t India with a population of 1.2 billion have a viable postal network, especially when the exploding e-commerce has opened up a massive opportunity for the courier service? The question seemed to have induced the prime minister and the telecom minister to reorganize and retool India Post to operate as the best and most effective player in the business. It seems Deutsche Post’s aggressive India business plan has ignited the passion of the NDA government which won’t spare an inch of the domestic business to foreign entities without an appropriate fight.

 

India Post has quietly tied up with the world e-commerce leader, Amazon, and is in talks with some of the local heavyweights such as Snapdeal and Flipkart offering speedy fail-safe courier services. India Post’s infotech-driven modernization programme is set equip itself with a much wider and faster reach, better customer service and help take up new lines of business, vastly improving its competitiveness through IT-enabled business processes and functions that are a must if it has to meet the speed and accuracy demanded in the e-trade. Says a senior executive in the marketing function at India Post: “E-Commerce models vary from pure warehousing models to total market place model. Logistics is estimated to be about 10-13 per cent of total e-tailing market.

 

Logistics cost   is a major consideration with e-commerce companies. Depending on model practised, pickup from warehouses (Amazon, Telebrands, Naaptol etc) or from multiple sellers (snapdeal, eBay etc) is required. Technological integrations with the technology platforms of established e-commerce companies, safe and secure transmission and complete visibility of articles during transmission up-to delivery are an important requirement. E-commerce market offers number of payment options like credit/ debit card for prepayment on e-commerce portal, Cash on Delivery. “COD option is very high in India requiring efficient cash collection on delivery and transmission back to e-commerce companies,” she explains

 

India Post has rationalised its parcel product portfolio. Express and Business Parcel were launched some months ago with COD facility. Presently, the Express Parcel network,  is limited to 40 cities. The plan is to expand it across the country. The COD facility has been added to Speed Post, a premium mail product designed to meet the emerging e-commerce market needs. Free pick up facility is being provided to bulk customers and depending on traffic of parcels, department has also set up extension booking counters in the premises of bulk customer. An electronic parcel network has been put in place to provide track and trace to the parcels being booked by various e commerce and other companies in tele/electronic commerce. India Post is trying though not as fast and as aggressively as it should to exploit its potential.

 

The Indian e-commerce space is booming. The market is set to leapfrog over South Korea, Russia and Brazil to nearly double to touch $30.3 billion by 2016. This would outpace the rest of the global industry, which would grow by 52.3 per cent in the corresponding period, including China that expects to see e-sales rise by 150 per cent during this period to emerge as the second-largest global arena for business-to-consumer sales over the internet. In India, huge population, growing internet penetration levels and rising incomes are set to drive the industry. Currently, just 10 million of its 137 million internet users shop online and 80 per cent of sales are for travel services. E-commerce provides a huge opportunity. However, to be part of the global market place and take advantage of the emerging business trend, India Post would require a management overhaul as well. Old mindset, bureaucratic ways of dealing, communication-shy, arm-chair departmental secretary-led management must be replaced by an approachable, answerable and innovative CEO who means business. (IPA Service)

 

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