Bad news! India Post is now top loss-maker PSU, pips BSNL & Air India.

Date : 15.04.2019

Bad news! India Post is now top loss-maker PSU, pips BSNL & Air India.

Salaries have kept climbing due to implementation of successive central pay panel awards, which coincided with continuous fall in revenue from traditional postal services.

India Post, which runs the ubiquitous post offices in the country and popular savings schemes apart from performing its relatively new functions like distributing MGNERGS wages, is turning out to be an enormous fiscal burden, reports Prasanta Sahu in New Delhi.

The perennial gap in the state-run entity’s revenues and expenditures has skyrocketed in recent years and touched a staggering Rs 15,000 crore in FY19, according to data reviewed by FE (see chart).

India Post’s annual deficit is now much higher than the losses incurred by ‘top loss-making’ PSUs like BSNL and Air India, which reported losses of Rs 8,000 crore and Rs 5,340 crore, respectively, in FY18.

Like other loss-making public sector enterprises, India Post’s finances are weighed down by high pay-and-allowance costs, now at over 90% of its annual revenue.

Salaries have kept climbing due to implementation of successive central pay panel awards, which coincided with continuous fall in revenue from traditional postal services.

India Post’s pay and allowances cost stood at Rs 16,620 crore in FY19 (revised estimate), against revenue of Rs 18,000 crore. If pension costs of another Rs 9,782 crore is added, the employee cost itself was Rs 26,400 crore in the last fiscal, nearly 50% more than the total receipts. In fact, the entity has estimated the expenditure on pay/allowances and pension to be Rs 17,451 crore and Rs 10,271 crore, respectively, in FY20, against projected revenue of just Rs 19,203 crore, clearly indicating that the situation is only to aggravate.

Sources said efforts to improve India Post’s performance and boost its revenue flows haven’t fructified due to a huge mismatch between product costs and pricing as well as availability of cheaper/faster substitution to traditional mail services. Besides raising prices of products, the entity might be asked to diversify in a big way into e-commerce and other value-added services by leveraging its massive 4.33 lakh workforce and 1.56 lakh-strong post office network.

“For a universal service like postal service, losses will be there as there are more post offices in the country than bank branches (1.16 lakh) of all commercial banks put together,” an official said. However, the huge mismatch between the product-service and price charged by the postal body needs to reduced, he added.

Under-recoveries are astronomically high for most of the postal services. The postal body spends on an average Rs 12.15 on each Postcard but realises only 50 paise or 4% of the cost. Average parcel service cost is Rs 89.23, but recovery is only half of that. Similarly, recoveries are very low for Book-Post, Speed Post, registration, etc.

The Expenditure Finance Committee, headed by the expenditure secretary, recently told the postal department that it has to be self-sufficient by levying adequate user charges as the Centre’s Budget could not absorb such recurring annual losses. “Costs are going up but revenues are falling because of fall in volume due to substitution. People have shifted to email, phone calling, etc,” another official said.

For the record, the body has diversified into other areas like financial product selling (sovereign gold bond, mutual fund and insurance), passport service delivery, passport related services, railway tickets and Post Shoppes to sell consumer products. These initiatives, however, generated only Rs 844 crore in 2018.

On the revenue front, India Post is largely defendant on remuneration for the National Savings Schemes and Saving Certificates, which contributed 60% of its revenue of Rs 11,511 crore in FY17. Officials reckon that given its reach in every nook and corner of the country, it can be a favoured Cash-On-Delivery (COD) channel used by e-commerce brands such as Amazon and Flipkart. However, it has not been able to garner much business from this segment due to handicaps like lack of warehousing facilities. The department has collected about Rs 2,600 crore under CoD since its introduction in December 2013 until October 2017.

Source : Financial Express