Under the administrative control of the Ministry of Communications and Information Technology (MCIT), the Department of Posts (DoP) is also referred to as the Indian postal service or the Indian post office. DoP is responsible for the collection, processing, transmission, and delivery of mail in India. A network of 154,866 post offices (according to the department’s 2011-2012 Annual Report), more than 570,00 mail boxes, and around 500,000 employees serve approximately 1.3 billion people over more than three million square kilometers, handling over 6.5 billion pieces of mail per year. This makes the Indian postal service the largest such network in the world. On average, a single post office covers over 21 sq. km. and serves almost 8,000 people. Out of the 154,866 post offices, almost 90% (139,040) are located in rural areas. In addition to its primary mail duties, the department also provides financial, insurance, and retail services to Indian citizens.

Despite geographic and population challenges as well as a lethargic modernization process, the service manages “to provide access to all persons living in this vast region, including those who have nebulous addresses.” The vast untapped potential of the postal service to provide better and greater services has resulted in repeated calls for the department’s restructuring and modernization. Mieko Nishimizu, president for the South Asia Region at the World Bank aptly summarized the Indian postal service: “You can think of India Post now as an old fashioned network trapped in the bricks and mortar of a dying mail service. Or you can think of India Post as an extraordinary human network that facilitates incredible access to virtually all Indians. Imagine the development potential of such a network with such access to people.”

The postal service can be traced back to the British East India Company and the British Raj. Prior to the arrival of the British, no centralized postal system existed. The earliest trace of an organized postal service was the system of couriers under Muhammad Bin Tughluqin the mid-14th century. The system evolved under the Mughal rule to the point where Emperor Akbar built post offices ten miles apart on the main roads and placed horses at each office for effective coordination and delivery. Despite this, however, the “British do not appear to have found any established system of communication when they began to extend their dominion in India.”

The East India Company took the lead and established a ‘Company Dauk’ in Mumbai in 1688. Offices were also established in Chennai and Kolkata between 1764 and 1766. Lord Clive (regarded as the founder of the British Empire in India) in 1766 introduced a regular postal system. Under this new system, landholders along the routes used for mail and goods transmission were to provide runners or couriers to forward the mail from place to other. For services provided, the rents of landholders were subsidized proportionally. Lord Clive also made some fundamental changes to how mail service was carried out in India. He introduced a system of rules and regulations that effectively laid the foundation that eventually would become the Indian postal service. The Minutes of Consultations of 24 March (1766) explains some parts of this system. “For the better regulation” of the postal service, Lord Clive “ordered that in future all letters be dispatched from the Government House; the postmaster or his assistant attending every night to sort [the mail] and see them sent off; that the letters to the different Inland Settlements be made up in separate bags, sealed with the Company’s [East Indian Company] seal; that none may open the packets except the Chiefs at different places…”

Warren Hastings, the first Governor General of India, identified the development of a postal system (for communication purposes) as an imperative if the British were to successfully establish their presence on the subcontinent. One of his first moves in this direction was to democratize the postal service. In March 1774, he opened up the postal system to public use; “prior to this the main purpose of the postal system had been to serve the commercial interests of the East India Company.” Details of a comprehensive postal plan were drawn out in January 1774, and the first general post office (GPO), as well the company’s postal department were established in Kolkata on March 31, 1774. A postmaster-general was appointed to oversee administrative and operational affairs.

From 1774 till 1837, the post office evolved as any other organization. In 1784, regulations were revised and adopted in the Kolkata office. This was followed by the establishment of a GPO in Chennai in 1778 and Mumbai in 1793. Services were expanded. The Bengal Regulation XX provided a clear explanation of landholders’ duties in the postal system. In 1830, Bombay Regulation XI banned all private postal services and subsequently made the Governor-General in Council the sole entity responsible for carrying mail.

Although the company had succeeded in creating a viable network connecting some of the more important towns, there still was no general postal system in India prior to 1837’s Act XVII. Under the act, a public post was established and the Company Government assumed “the exclusive right to convey letters for hire in the territories of the East India Company.” In accordance with the act, multiple new post offices were established (the first on October 1, 1837) and a dual system of post offices came about – “the Imperial Post, which controlled all main routes and large offices” and “the District Post, which was entirely local and controlled rural services in each district.”

While this new system was effective in achieving its goal of creating a more comprehensive postal network, improvements could still be made. Accordingly in 1850, the Government of India (the British Raj) appointed a three-member committee to look into the matter. The commission’s report in 1851 introduced new proposals for uniform postage rates and practices for all associated post offices. The Post Office Act of 1854 was enacted to include the reforms. The act centralized postal services, creating the Post Office of India as it exists today. The first postage stamp was also introduced in that year. The Indian Post Office now is governed by the Indian Post Office Act, 1898.

Following the 1854 Act, Indian postal service constantly expanded. As a result of increasing affordability, mail traffic increased and the postal office network expanded. In 1863, the first railway mail service was established. The Post Office greatly expanded services offered over time. In 1877, it introduced mail order services with the value payable system; in 1880, it introduced money orders; in 1882, the Post Office Savings Bank was established; and in 1884, Postal Life Insurance (PLI) was introduced to cover all postal employees.

After independence in 1947, control of the Post Office was transferred to the new Indian government. At that time, there were 23,344 post offices, most located in urban areas. Recognizing the potential of the Post Office, the new Indian administration made expansion a priority. Jawaharlal Nehru observed that the “postal system is a necessary and important public institution.” In the last 60 or so years, the service has undergone a seven-fold expansion and shift from an urban focus to a rural focus. The service has also improved the quality and quantity of financial and other services offered.

At the management level, the Department of Posts is led by a director general who answers to the Union Minister for Communications and Information Technology. The director general is also the Secretary of the Department as well as the chairperson of the Postal Service Board (PSB). PSB is the apex-level management body of the DoP. Consisting of the chairperson and six other members, the board is responsible for “personnel management, postal operations, technology induction and implementation, postal life insurance, investment of postal life insurance funds, human resources development, and planning.

At the operational level, the Indian postal network is divided into 22 Postal Circles. Each circle, headed by a chief postmaster general, is responsible for a certain geographic area. The circles are divided into regions consisting of field units called divisions. Post offices throughout the country are divided into head, sub, and branch offices.

The duties of the department can be categorized into four major areas: postal operations, financial services, insurance, and stamps.

Postal Operations: The most fundamental duty of any post department is the transmission of mail. Mail in India is “collected from 57,379 letter boxes in the country…processed by a network of 387 mail offices, and conveyed by road, rail, and airlines all over the country.” For 2009-2010, the service handles 6,589.9 million pieces of mail. This number increased 0.4% in 2010-2011 to 6,616.5 million pieces. For intra-city mail delivery, the department maintains Mail Motor Services consisting of 1,282 motor vehicles. For 2010-2011, these vehicles traveled 30.57 million kilometers.

In addition to regular mail service, the department also provides a variety of “premium products” for faster as well event-specific delivery. These premium services include Speed Post, Business Post, Express Parcel, Media Post (for outreach purposes), Greeting Post (special occasion greeting cards), and Logistics Post (material distribution).

The department has also taken steps to modernize its mail transmission process. Chief among these are:

• The Mail Network Optimization Project – a wide spread effort to improve quality and efficiency of services provided.
• A proposal to set up Automated Mail Processing Centers (AMPCs) to improve sorting efficiency as well assist in the “modernization of mail network, consolidation of sorting activities, and expedite sorting and delivery.”
• An initiative to create a National Address Database Management system

Financial Services: The Post Office provides a wide variety of financial services. The core of these services is focused on the savings account and related schemes. The Post Office Savings Bank (POSB) “is the oldest and largest banking institution in the country” with more than 238 million savings accounts in more than 154,000 post offices. The POSB schemes are undertaken by the department on behalf of the Ministry of Finance (MoF). As of March 31, 2011, the department managed 264,456,655 accounts with an outstanding balance of Rs. 6189430.26 million (~$112 billion). The various savings related products offered include the Savings Bank Account (SB), Recurring Deposit Account (RD), Monthly Income Scheme (MIS), Public Provident Fund (PPF), Time Deposit (TD), Senior Citizens Savings Scheme, and National Savings Certificate (VIII and IX) issue.

Due to popular demand, DoP offers money remittance services. These include money orders, electronic money orders, instant money orders, MO Videsh, International Money Transfer Service, Electronic Clearance Services, and MoneyGram International Money Transfer. Additionally, the Post Office also retails mutual funds. Furthermore, in conjunction with HDFC Bank, the Post Office offers currency exchange for areas without access.

As a public service, the Post Office also disburses wages under the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA). Post offices located in rural areas are used as wage collection and dissemination points. The department has also signed a Memorandum of Understanding (MoU) with the Ministry of Statistics and Programme Implementation (MoSPI) to collect data on the consumer prices in rural areas to calculate the All India Consumer Price Index (CPI) as well as the Rural CPI.

Insurance: The department provides insurance services through two main programs: Postal Life Insurance (PLI) and Rural Postal Life Insurance (RPLI).

Initiated in 1884 as an insurance scheme only for postal employees, PLI now covers civil and military employees of “central and state governments, local bodies, government aided educational institutions, universities, nationalized banks, autonomous institutions, and public sector undertakings of both central and state governments.” As of March 31, 2011, PLI had 4,686,245 active policies for a total insured sum of Rs. 640,779 million (~$11.6 billion).

RPLI, in contrast to PLI, was established in 1995 on the recommendation of the Official Committee for Reforms in the Industrial Sector. The committee pointed out that “only 22% of the insurable population in country had been insured.” It also stated that the “Committee understands that Rural Branch Postmasters who enjoy a position of trust in the community have the capacity to canvass life insurance business within their respective areas…” Following this, the Indian government extended the PLI program to rural areas starting March 1995. As of March 31, 2011, RPLI had 12,203,345 active policies for a total insured sum of Rs. 661,322.3 million (~$12 billion).

Philately: Philately refers to the collection and study of stamps. As the official government entity in charge of postal affairs, DoP distributes stamps, special/commemorative postage stamps, and postal stationery. They also maintain the National Philatelic Museum and promote stamp collecting through exhibitions and other activities.

The Department of Posts, despite its billion-dollar plus budget, remains a heavily subsidized entity. For the 2012-2013 year, the budget stands at Rs. 6,537.12 crore ($1.18 billion USD). However it is slated to spend Rs. 7173.33 crore (~$1.3 billion USD) on the maintenance and operation of the postal network alone. The other single biggest budget allocation is Rs. 3500 crore (~$633 million USD) for pensions. Another major expenditure is the Plan Outlay. For 2012-2013, Rs. 800 crore ($144.718 million USD) have been allocated for schemes relating to IT induction and modernization in postal operations, mail operations, estates management, premium services, human resources management, rural business and access to postal network, and special programs in the North East Region and Sikkim. The Department of Posts regularly runs a deficit and is covered by the General Revenues of the Government.

Budget Deficits

As with many government departments, DoP is heavily dependent on central government funding for day-to-day operations. The consistency of the deficits has been a cause for concern among policymakers as well as DoP and MCIT leadership. The department has incurring deficits every year for the past two decades. This reached a tipping point in 2011 when the deficit, as a result of a wage hike based on the Sixth Pay Commission’s recommendations, shot the deficit to 85% of the allocated budget. For 2009-2010, the total allocated budget was Rs. 62667.01 million (~$1.1 billion USD) whereas the expenditure was Rs. 129,080.05 million (~$2.4 billion USD), resulting in a net deficit of Rs. 66413.04 million (~$1.2 billion USD) – larger than the allocated budget. In 2010-2011, the overall budget increased to Rs. 69623.32 million (~$1.2 billion USD) and the deficit turned out to be Rs. 63456.16 million (~$1.1 billion USD).

This inability to break even has not been unnoticed. The Ninth Five Year Plan (for years 1997-2002) mentioned the need to address the deficits, noting that the post office needed to be come self-sustaining. “To achieve this objective, necessary policy measures would have to be initiated to recover the operational cost and gradually eliminate the subsidy provided on various services in a time-bound manner….the deliberate policy of subsidizing the services especially in rural, hilly and tribal areas in deference to their social significance, has combined to steadily widen the gap between revenue and expenditure of the Department. While the cutting down of costs and improving the efficiency of operations have to be a continuous process, the situation also calls for a revision of rates at regular intervals, which has not been done to the extent required in the past.”

A look at postal finances during 1997-2002 reveals that not much really changed in terms of deficit reduction. In fact, the deficit continued to rise through the plan period. An effort was made to address the situation in the Tenth Five Year Plan (2002-2007) as well. Regarding the deficit, the Plan notes: “Postal finances have deteriorated sharply over the last decade. Postal deficit is an open-ended subsidy and forms part of the general budget. The deficit has shot up almost 16 times…This has serious implications for resource availability for other needy sectors like infrastructure and social development. This situation cannot be sustained for long without serious implications. The Department should endeavour to achieve self-sufficiency over the next five years.”

The results were the same. Deficit continued to increase and no real concrete steps were taken to address the issue head-on. There is a lack of serious effort to address this issue. An expert on the issue observes: “There’s no financial accountability on the bureaucrat. So, nobody wants to rock the boat.” As amount of mail traffic delivered continues to decrease as a result of technological innovations and diffusion and private firms try to gain a foothold in India’s monopolistic postal service market, DoP’s deficits are likely to become more of a burden on the Indian government.

Department of Posts Incurs Deficit of Rs 6,345 crore (Economic Times)

Ninth Five Year Plan - Postal Sector (Planning Commission)

Tenth Five Year Plan - Posts (Planning Commission)

Joint Expert Committee Report

In 2010, Department of Posts, Departments of Financial Services and Economic Services (Ministry of Finance), and the Invest India Economic Foundation (IIEF) commissioned an ‘Expert Committee on Harnessing the India Post Network for Financial Inclusion.’ The objective of the committee was to explore ways in which the postal system’s pervasive infrastructure, especially in rural areas, could be used to facilitate financial services access to those who currently lack it. The committee’s report made the following recommendations for DoP:

- It should provide low cost bank accounts to all Indian citizens and look for ways to provide accounts to other entities such as microfinance institutions, mutual fund companies, insurance providers, and telecom operators.

- It should look for ways to generate effective and cheap high-volume money orders which would lessen the Department’s dependency on central government subsidies.

- It should envisage a comprehensive financial infrastructure involving many partners and provide services that expand its role and network as well as monetarily benefit it.

- India Post should request the addition of its financial inclusion project into the Terms of Reference of the Technology Advisory Group for Unique Projects.

- The current structure of the Post Office Savings Bank (under the control of the Ministry of Finance) should be considered and amended to allow the Department to play a more active role.

Draft Post Office Bill 2011

In the latter half of 2011, DoP sent the Draft Post Office Bill, 2011 to the Cabinet. The bill was introduced to replace the India Post Office Act, 1898 that currently provides the legal backing for the Post Office. In addition, the Bill seeks to provide a framework for some drastic changes to the courier service network in India. While the bill purports to open up the market for private sector participation, certain sections of the bill have been met with vehement opposition. At the center of this is a provision that effectively monopolizes the market for the government for the next 15 years. In order to facilitate the gradual opening up of the market, the government proposed a dual pricing scheme whereby couriers carrying letters up to 50 grams and 150 grams have to charge double the government’s postal rates and double the government’s express service rates.

The Provision Should be Enacted

This position is espoused by the DoP. The primary objective for the enactment of this provision is deficit reduction. In light of the consistent deficits incurred, the department argues that such a restrictive policy is necessary in order to recoup some of the costs of providing services in the rural areas. By effectively eliminating the private sector, the department hopes to see an increase in the amount of mail traffic handled from urban areas, thereby increasing its revenues. The department also argues that government monopolies on letter delivery is a common international practice.

Highlights of Draft Post Office Bill 2011 (Department of Posts)

The Provision Should not be Enacted

The position is advocated by the private sector as well as those concerned about what they consider a blatant government intrusion and abuse of power. The private sector contends that a bill of this magnitude will effectively wipe out a lot of private courier services. Critics point out that “ such a restrictive practice is against the requirements of modern trade in an economy which …may still achieve a growth rate of 7 per cent…implementation of such a clause will inhibit growth.” They also point to a joint study, “Facilitating Trade and Global Competitiveness: Express Delivery Services in India” conducted by the Indian Council for Research on International Economic Relations (ICRIER) and the Indian Institute of Management, Kolkata, which points out that “the decision of the government to open the ‘reserved area' of 50 gm at a price multiple of twice the India Post EMS will adversely affect all segments of the EDS/courier industry, with the smaller players being affected more.” Subsequently, “this will lead to significant job losses in the lower end of the EDS/courier business.”

Government Considering Bill to Control Private Courier Service (Economic Times)

India Post To Lose Its Monopoly; Govt. Forces Courier Cos To Charge Double Rates (by Souvik Sanyal, Economic Times)

A Raja

A Raja was the former Minister of Communications and Information Technology. He served in this position from May 2009 to November 2010 when he was replaced by Sibal in the wake of the 2G spectrum scandal. Born in 1963, Raja, a Dalit (member of the Scheduled Castes) was educated at the Government Arts College (B.Sc.), Government Law College, Madurai (B.L.), and Government Law College, Trichy (M.L.). He was elected to the 11th Lok Sabha in 1996 and has since served as the Union Minister of State, Rural Development; Union Minister of State, Health and Family Welfare; Union Minister of Environment & Forests; and on two occasions as the Union Minister of Communications and Information Technology.

Today, A Raja’s name is synonymous with the infamous 2G spectrum corruption scam that reportedly, according to CAG, resulted in a loss of Rs 176,645 (~$31.3 billion USD) of potential revenue for the Government of India. During his time as the Communications and Information Technology Minister (May 2007- November 2010), Raja allegedly “presided over the underpricing of bandwidth to mobile companies – apparently in return for bribes.” He was arrested by the Central Bureau of Investigation (CBI) in February 2012. He is currently free on bail and awaiting further legal proceedings. In July 2012, he publicly demanded an opportunity to question Vinod Rai, head of the independent government auditing body CAG, in court over the alleged loss.  He still serves as the Member of Parliament (MP) from Udhagamandalam and also as the propaganda secretary of the DMK party.

Official Bio (Archived Copy)