As Economy Zooms, India's Postmen Struggle to Adapt [WSJ]
Beaten by Private Couriers, And Unable to Downsize, State Tries to Diversify Selling Cashews and Aloe Vera
By ERIC BELLMAN
October 3, 2006; Page A1
MUMBAI, India -- When Mumbai Region Postmaster General A.P. Srivastava joined the postal system 27 years ago, mailmen routinely hired extra laborers to help carry bulging gunnysacks of letters they took all day to deliver.
Today, private-sector couriers such as FedEx Corp. and United Parcel Service Inc. have grabbed more than half the delivery business nationwide. That means this city's thousands of postmen finish their rounds before lunch. Mr. Srivastava, who can't fire excess staffers, spends much of his time cooking up new schemes to keep his workers busy. He's ruled out selling onions at Mumbai post offices: too perishable. Instead, he's considering marketing hair oil and shampoo.
[A.P. Srivastava]
"We have to find new ways to generate revenues and use excess space and staff," sighs the 52-year-old Mr. Srivastava, sipping tea at his desk piled high with files waiting for his approval. "Laying people off isn't an option."
India's vast postal service, the world's largest, highlights a little-understood feature of this nation's economic transformation. While India often draws criticism for its failure to sell its vast network of state-owned companies, the government has quietly been opening many of its agencies to blistering competition from private-sector rivals.
But as India lets its public sector get squeezed, it faces a big dilemma: What to do with these often huge and politically connected organizations during the painful transition period where they have to become competitive and profitable or extinct?
Once the pride of India's civil service, India Post and its predecessor, the British East India Co., controlled most mail delivery for centuries. But since a reform-minded government started allowing more competition in the 1990s, more-efficient private couriers have eaten deeply into India Post's business.
Likewise, state-owned phone company Mahanagar Telephone Nigam Ltd. used to have a monopoly on much of the phone service in India. Today it is battling with an onslaught of internationally financed competitors that have driven the quality of service up and rates down on everything from local to long-distance to cellular service to Internet connections.
State-run airlines Air India and Indian Airlines have been under attack for more than a decade and the industry has just become more competitive with six new carriers starting operations in the past two years. The banking sector is still dominated by the giant State Bank of India but the country's growing middle class is taking most of its business to the high-tech private banks, such as HDFC Bank Ltd. and ICICI Bank Ltd. leaving the state banks with the least-profitable businesses and worst borrowers.
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Such competition from private business is helping to change the face of the Indian economy. The country is becoming a growing force in the global economy as reforms have unleashed the power of its one billion consumers. India's economy grew at a faster-than-expected 8.9% in the second quarter, nearly matching China's torrid pace.
But the shift toward the private sector has been a gradual process, made necessary by the political reality faced by a succession of unstable coalition governments. Today's Congress Party-led coalition depends on the support of communist parties, which oppose layoffs and privatizations. When the coalition first came to power in 2004 one of the first things it did was close the Disinvestment Ministry which oversaw privatizations.
In contrast, in the U.K., Margaret Thatcher -- one of the earliest promoters of privatization in her country -- was able to use her Conservative Party's strong control of Parliament to push though privatization. She closed down unprofitable organizations and auctioned off many of the U.K.'s largest state-owned companies in the 1980s despite violent strikes and opposition from the left.
In India, Mr. Srivastava's struggle to modernize Mumbai's post offices shows how efforts to reform state-run entities can be tripped up by a convoluted bureaucracy and populist politics. India Post is forced to maintain its 550,000 employees with full benefits and run a vast network of post offices, most of them unprofitable. What's more, politicians keep India Post from raising postal rates, so it loses money on almost every postcard and package it handles.
While India Post runs the largest postal network in the world with more than 155,000 branches, it's also one of the most inefficient. Each of the U.S. Postal Service's 700,000 employees handles more than 15 times as many pieces of mail a year on average as India Post workers. The U.S. service also makes money, reporting an operating profit of more than $1.5 billion last year, while India Post lost $300 million.
The British East India Co. established the first postal stations in Mumbai, the city formerly known as Bombay, in 1688 and in Calcutta (now known as Kolkata) in 1727. About 50 years later, it started regular service between the two cities using runners who carried spears with bells attached to ward off tigers.
Mr. Srivastava fondly recalls the days when the local post office was the only place people could mail a letter or package, or even make a phone call. He joined the postal system in 1979 partly because of its prestige and importance in Indian communities. In his first posting, as head of a post office in the northern state of Uttar Pradesh, Mr. Srivastava was given membership in the best clubs, invited to join a local education committee and was regularly paid visits by local politicians and business leaders: high status for a 27-year-old.
[Losing Rupees]
During the annual rush of mail during Diwali -- the festival of lights during which India's 800 million Hindus exchange cards and gifts -- Mr. Srivastava remembers having to use every inch of floor space to sort mail, "even in my office." There was then virtually no competition. When Mr. Srivastava once discovered that a clandestine private courier was transporting mail, he called the police and had the operation shut down.
Today, there are more than 2,000 private companies delivering documents and packages in India, ranging from tiny operations with a handful of men who make around $2 a day to big international players like FedEx. The industry generates $850 million a year in sales, according to estimates by the Express Industry Council of India, which represents private couriers. The market is so promising that in 2004 DHL Corp. decided to take over one of the leading domestic courier services for $160 million.
"The role of the post office was much more important in the lives of the people back" in the old days, says Mr. Srivastava wistfully. "Now, there are so many other opportunities that our service is not given the same respect."
Under pressure from the central government to pay its way, India Post has been forced to try an assortment of new businesses. The agency now sells the outsides of envelopes and mail boxes as advertising space. For the hundreds of millions of Indians without access to computers, the postal service will receive, print and deliver email to its destination by hand. And for the first time in India Post's long history, its local postmen have to pick up mail directly from homes.
The post office is even outsourcing its postmen to phone and credit-card companies, who use them to confirm the home addresses of new customers. Mahanagar Telephone Nigam, one of India Post's clients, pays 30 rupees (about 64 cents) per confirmation. Other companies, including the Indian arms of Western Union Financial Services Inc. and General Electric Co., now pay India Post commissions to sell their loans and money-transfer services. Mr. Srivastava is even renting out the century-old domed General Post Office at night for movie shoots.
In a dusty corner of the cavernous Mumbai General Post Office, at the former domestic-parcels counter, Shyam Sundar Dhini was peddling cashews, herbal medicines and aloe vera gel. A "Happy New Year" sign hung on the wall above his makeshift shop despite its being September. "I have become a salesman instead of a postman," said Mr. Dhini, a 23-year postal veteran who isn't quite sure what aloe vera gel is used for. "I know everything about letters and stamps, but nothing about sales. No one wanted this job because this is not what postmen do."
Some postmen, who are now under pressure to learn new skills ranging from using a computer to how to accept mutual-fund applications, have been reluctant to adapt. "There is resistance from the staff, especially the older set," who have grumbled about the new chores, concedes Mr. Srivastava. "But if they do not do these other activities they will not have a job to do."
[India's postal service is leasing out the sides of its mailboxes and vans for advertising to raise money.]
India's postal service is leasing out the sides of its mailboxes and vans for advertising to raise money.
Still, 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. Since the neighborhood postman is the government employee closest to the average citizen, Mr. Salvi says any government that causes them to strike risks losing votes. Few politicians are willing to take that risk.
Postal workers also grouse that they haven't been properly trained to do the new jobs being foisted upon them or given the facilities needed to carry out nonpostal assignments. Mr. Salvi's post office at a busy Mumbai intersection illustrates the problem. Like most such offices in India, it's cramped and dirty and hasn't changed much for decades. Next to his desk is a huge old safe with a skeleton key. Nearby is a roaring gas stove, which is used to melt the plastic to seal registered letters. Following a colonial-era procedure, each registered letter is tied by hand with brown twine, which is then glued to the envelopes with six blobs of plastic, each stamped with the official postal seal.
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."
Motivating demoralized postal workers is tough. A mid-level manager at India Post, for example, makes about $500 a month, roughly one-third the salary of a manager at an international courier in India. Rigid bureaucratic wage scales dictate salaries and restrict bonuses, making it almost impossible for the post office to offer incentives. Mr. Srivastava says the only reward he can give hardworking postmen who have excelled in promoting new products is a thermos bottle or a lunch box.
Meanwhile, to fend off competition from private couriers, India Post is trying a tactic left over from India's socialist days: outlawing the competition. The agency's political backers are pushing for an amendment to postal laws that would make it illegal for private carriers to deliver parcels or documents that weigh less than 300 grams. It would also make couriers pay 10% of their revenues to underwrite India Post's expansion into rural areas and force 100%-owned foreign companies, such as FedEx, to reduce their shareholding in local units to 49%. Legislators will be debating the bill later this year.
"Customers are looking for short transit times and a high level of service and technology but these are not elements that the postal service provides," so any restrictions on couriers will hurt Indian companies says Jacques Creeten, the Mumbai-based managing director for FedEx. "India is not isolated in the world -- it is competing with China, Vietnam and Bangladesh and exporters need the express industry to stay competitive."
Mr. Srivastava says he doesn't need a monopoly, but argues that he can't be expected to compete with couriers that don't have to carry India Post's high administrative costs and political baggage. "We didn't realize this was really going to hit us," he says, as he signs document after document required by India's layers of bureaucratic protocol to run his domain of more than 10,000 workers.
"Some people have still not realized." |
