The story goes that Dhirubhai Ambani had a vision of a phone service that could connect people all over India at a cost lower than that of a postcard.
Not only has this vision come true, but has become even bigger than what Mr Ambani could have even imagined – pan-India phone calls are now practically free and postcards are extinct. In fact, people don’t send anything by post any more. Communication is almost totally electronic today, and documents and parcels are couriered.
Where does that leave the Indian Post Office (IPO)?
A few numbers:
This huge army of people, spread across so many locations, generates only a paltry income. Evidently, there is not much business; hence, not much income.
But one thing is there in plenty – complaints.
During 2019-20, IPO received 175,000 complaints. Compare this with the Indian Railways (IR), which employees ten times more people, serves a massive number of travellers and generates over nine times the income.
IR is not considered to be the epitome of efficiency. Yet, it receives about 800,000 complaints per year, less than half that of IPO, despite being 10 times bigger.
IPO is pretty bad at its job, wouldn’t you say?
So, what do you do with such an organisation?
There is the 'butcher' solution, of course. Shut down IPO, sell off the owned properties and sub-lease the rented ones where possible, give the staff a VRS, etc. Shrieks of protest will abound, plus the lost votes…
Another option is to let IPO die a slow, natural death. Let the employees retire one by one, gradually shut down the post-offices, bear the annual loss for many years to come, etc. This is a quiet solution – no public protests, no lost votes, no hangama… and what’s Rs20,000 crore a year anyway?
The brave solution is to re-engineer IPO and turn it into a profitable and valuable organisation, which is what the government (purportedly) is trying to do. IPO’s annual report talks about rural outreach, trust among people, etc.
All that is very nice to hear, but what does IPO do?
What everyone else does, of course. Lots of banks in India, so let’s do banking. Let’s also sell insurance, deliver passports or (innovation!) sell pure gangajal, from Gangotri itself, bottled for your convenience.
Unfortunately, none of these businesses do much for the bottom-line.
Take banking, for instance. IPO’s banking arm has deposits of Rs8.23 lakh crore, quite a sizeable amount, bigger than Punjab National Bank (PNB). However, PNB has 100,000 employees, less than a quarter of IPO’s staff strength. Deposits of Rs8.23 lakh crore cannot sustain over 400,000 employees.
A very large branch network is no longer useful to a bank. Banking is going electronic very rapidly, and in India, where more and people are acquiring smart phones, branch banking eventually will become redundant.
Besides, who needs another bank anyway? The government is trying to consolidate banks and make them big. A Rs8 lakh crore bank is neither here nor there.
Other businesses, such as selling insurance, can at best be a side-show, not capable of paying IPO’s huge staff costs.
Bottom line – IPO is chasing business lines which are already crowded and where it has no special strength. This will never lead to viability.
May I offer a possible option?
emerging business in India – e-commerce. Volumes are growing at breakneck speed, and total business is expected to reach Rs15 lakh crore in 2026, a six-fold growth since 2017. Even online grocery sales are expected to grow at a CAGR (compounded annual growth rate) of 57%, reaching Rs1.5 lakh crore in 2024. As internet connectivity and smartphone usage increase, and people discover the ease of buying online, there is no doubt that e-commerce will boom in the years to come.
Yet, the biggest market for e-commerce is yet largely untapped – rural India. And this is where IPO has an outstanding edge over anyone else.
A big hurdle facing all e-commerce companies is the ‘last mile problem’, i.e., how to get the goods to the buyer from the last point up to which it is possible to carry items in bulk. The cost of this final delivery leg can be as much as 50% of the total transportation cost.
IPO has a huge coverage in the rural areas with a post-office serving, on an average, just 21sq km (square kilometre).
Postmen are used to covering a reasonably large area on foot or bicycle. They are also used to handling small packages and delivering them to the right addresses and, hence, they need little training to become the ‘last mile carrier’ in an e-commerce delivery chain.
There is also a significant opportunity for reverse delivery, i.e., picking up stuff from senders and forwarding them to recipients. While on his rounds delivering letters and e-commerce packages the postman can also pick up courier packets and other material for onward delivery, including (possibly) handicraft items made in rural homes.
There is absolutely no other organisation in India that has such a huge reach over the entire country with an army of trained ‘delivery executives’. All that is needed is to organise its capabilities, tie up with major e-commerce and courier companies, and leverage its coverage (especially in villages).
If done right, IPO can truly become a phoenix, rising from the ashes of a decaying postal business to being the monopoly service-provider in a crucial leg of the e-commerce delivery chain.
Will this happen, or will the dying duck turn into a dead duck and not a phoenix?
(Deserting engineering after a year in a factory, Amitabha Banerjee did an MBA in the US and returned to India. Choosing work-to-live over live-to-work, he joined banking and worked for various banks in India and the Middle East. Post retirement, he returned to his hometown Kolkata and is now spending his golden years travelling the world (until Covid, that is), playing bridge, befriending Netflix & Prime Video and writing in his wife’s travel blog.)