9th Five Year Plan (Vol-2)

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Transport and Communication
Transport || Postal Sector || Telecom Sector || Information and Broadcasting || Information Technology || Tourism


7.3.1 An efficient postal communication system is crucial for growth and modernisation. The Indian postal system is the largest in the world, having a network of 1.53 lakh post offices. In terms of population served per post office, it compares quite well with the rest of the world, both developed and developing countries. Only UK, France, Australia and USA, with a coverage of 2978, 3413, 4468 and 5203 persons served per post office respectively are ahead of India, where one post office serves an average population of 5518, covering on an average an area of 21.48 sq.kms. Besides providing a variety of postal services, the Indian postal system is playing a vital role in the resource mobilisation efforts, especially in the rural areas. The importance of these functions is illustrated by the deposits to the tune of Rs.91,795 crore in 160.5 million accounts mobilised under the Post Office Saving Banks (POBs) scheme as on March 31,1996

Eighth Five Year Plan - Review

7.3.2 Modernisation of the postal services by introducing the latest technology and expansion of the postal network in the uncovered areas, especially in the rural areas, were the two thrust areas of the Eighth Five Year Plan. A target of opening 3000 Extra Departmental Branch Offices (EDBOs), mainly in the rural areas, and 500 Departmental Sub-Offices (DSOs) were fixed for the Eighth Plan. The targets were later revised by the Department to 1440 and 650 for EDBOs and DSOs respectively. The performance with regard to the opening of DSOs, mainly in the urban areas, has been satisfactory with the achievement of 72% of the revised and 93% of the original target. However, in the rural areas only about 52% of the original target has been achieved. The response to the newly formulated scheme of Panchayat Sanchar Sewa Yojana has been lukewarm with only 38% of the target having been achieved.

7.3.3 Modernisation and mechanisation of postal operations were accorded the top priority in the Eighth Plan. The major targets fixed included installation of 5000 Multi Purpose Counter Machines (MPCMs), introduction of mechanised mail sorting system in two metro cities in addition to the commissioning of the system at Bombay and the setting up of the satellite-based money transfer system in 75 centres in the country. Except for the setting up of money transfer system, in respect of which the targets have been achieved fully, the performance in the other two areas has not been satisfactory. A mechanised mail sorting system was established in Chennai besides Mumbai. The metro city of Delhi would be covered during the Ninth Plan along with a few major urban hubs for mail processing. In the case of MPCMs only about half of the target could be achieved. Issues relating to choice of technology and standardisation of equipment, besides delay in the supply of equipment, were the main constraints.

7.3.4 During the first Seven Five Year Plans, construction of buildings has been the single most important activity of the Department of Posts. During the Eighth Plan, this activity was accorded a lower priority with mechanisation and modernisation of postal services being the first charge. However, keeping in line with the past trend, the building activity continued to be the dominant activity of the Department at the implementation level. The expenditure on buildings was excessive and out of control, constituting 52.55% of the actual expenditure, against 37.33% envisaged for it in the approved Eighth Plan outlay (at 1991-92 prices).

7.3.5 For the Eighth Plan, an outlay of Rs.325 crore was approved to be funded entirely through budget support. The expenditure is anticipated to be Rs.367.88 crore, which works out to Rs.286.77 crore at 1991-92 prices i.e. about 88% of the approved outlay. The shortfall in expenditure has been due to the slow take-off of the priority programme of modernisation and mechanisation of postal operations, especially during the first three years of the Plan.

Ninth Five Year Plan

Problems, Strategy and Policy Framework

7.3.6 The Ninth Plan would aim at making the postal services self-financing at the sectoral level. 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. However, cross subsidisation amongst services may continue so as to ensure the provision of the most essential services to the people, especially the poor, at affordable prices. Due autonomy may have to be given to the Postal Board to take appropriate decisions in this regard.

7.3.7 The revenue deficit of the Department of Posts has been steadily increasing over the years and is currently estimated to be Rs.1114 crore (1997-98 BE). The details of the revenue deficit are given in Table 7.3.1.

Table 7.3.1
Details Of Postal Deficit
                                                                                       (in Rs. crore)
----------------------------------------------------------------------------------------------------------------------------------------------------- Non-Plan         1995-96               1996-97                 1997-98               1998-99                         (Actuals)             (Actuals)      (RE)                    (BE) ------------------------------------------------------------------------------------------------------------------------------------------------------ Gross Rev. Expdtr.      2472.14               2982.32          3677.99                  3788.51
Deduct Recoveries        662.31              1064.44           1144.10                  1192.00
Net Expdtr.              1809.83               1917.88          2533.89                  2596.51
Receipts            1150.42                  1214.62               1625.00                  1700.00
Net Deficit          659.41                    703.26                908.89                    896.51
While the dependence on manual systems in most of its operations has resulted in mounting operational cost for the Department, the deliberate policy of subsidising 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.

7.3.8 The large quantum of subsidy provided on the postal stationery and services is the main reason for the deficit. Out of twenty three services provided by the Department, only four i.e. Letter, Speed Post, Insurance and Foreign Mail are currently yielding surplus per unit of activity/service. There seems to be little justification for subsidising services like Registration, Money Order, Saving Bank, Regd. Newspaper etc. 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. Services like competition post card, in respect of which people have the willingness and capacity to pay more, should be appropriately priced to generate more resources for the sector. Even the subsidy on postcards is excessive given the very low price charged for postcard. The pricing of services meant for business/ commercial sector should be on a remunerative basis.

                                         Subsidy on Major Postal Services - 1998-99  Projections
                                           Cost            Revenue               Subsidy                  Total   traffic         Total loss
                                           per unit        per unit                 per unit                     ( in lakh)           (Rs.Crore)
                                          (Paisa)          (Paisa)                   (Paisa)
         Post Card                    336                       25                   311                          4815                150 
         Letter Card                  330                      129                   201                          6760                135
         Printed Postcard          336                      150                   186                          1815                 34
         Comp. Postcard           391                      258                   133                           379                   5 
         Regd. Newspaper         389                        26                   363                         1352                 49
         Registration                2065                    1117                   948                         2729                259
         Money Order              2871                    1623                   1248                       1085                 135 
         Parcel                       3595                     2724                    870                         619                  54
         Savings Bank             1704                    1522                    182                        4717                  86
         I.P.O.                        1392                        93                  1299                         249                   33 
         N.S.C.+K.V.P.           3132                     2061                  1071                         671                   72
         Mahila S. Yojana        4019                    1522                   2497                        123                    31

7.3.9 Upgradation of technology and modernisation of postal operations would continue to be a thrust area during the Ninth Plan. The use of appropriate technology for speedy and reliable mail handling would be an important component of the strategy in this regard. The main areas involved are:

  1. counter computerisation;
  2. mechanisation of mail handling;
  3. modernisation of post offices;
  4. electronic money transfer system and
  5. introduction of mechanical aids.

7.3.10 Computerisation and information technology will have to play an important role in the entire scheme of modernisation of services, including developing effective and efficient management information system. Besides improving the efficiency, it will lead to a marked improvement in the quality of services. Only a small segment of the vast network has been computerised so far. With the limited resources available with the Government in the form of budgetary support, it is not feasible to achieve the desired speed, spread and extent of computerisation. To achieve full computerisation of various services and operations throughout the country in a time-bound manner, the possibility of private sector participation, including lease finance in this area will have to be seriously explored during the Ninth Plan.

7.3.11 The area of service provision would be further expanded during the Ninth Plan by introducing new and diversified services including value-added services. Provision of customised services, like mass mailing services, hybrid mail, corporate money transfer, etc. would be an important element of the strategy in this regard. New value-added services, like premium saving bank services based on smart card, gift services, etc. would be extended. The quality and efficiency of speed post/courier services would be further improved and extended to more areas during the Ninth Plan.

7.3.12 About half of the Gram Panchayat Villages do not have a post office of their own, though they are serviced by the nearest office. As per the existing norms, only about 8041 of such villages, including Gram Panchayat Villages, are qualified to have a post office on the basis of two of the existing three norms i.e. distance and population. The present scheme of opening of post office in the rural areas i.e. Extra Departmental Post Offices (EDBOs) is neither capable of ensuring expansion of services at the required pace due to limited public sector funds nor is it financially sustainable over a long period of time due to large quantum of subsidy involved (67% to 85%). The response to the recently formulated scheme of involving Gram Panchayats through the Panchayat Sanchar Sewa Yojana has not been encouraging. Innovative/alternative strategies would have to be adopted with a view to achieving the objective of providing basic counter services in the uncovered areas in order to provide postal connectivity essential for socio-economic development. To make the service at the village level viable, convergence of similar services like post, telecom, fair price shops etc. may have to be explored.

7.3.13 Postal services continue to be a Government monopoly. However, without affecting the predominant role of the Government in this sector, it should be possible to provide self-employment opportunities to the educated youth and to small scale entrepreneurs by involving them in the provision of selected services. The major areas among these are :

  1. opening of new post office in urban areas through licenced postal agents;
  2. printing of postal stationery;
  3. sale of stationery through licenced agents on franchise or commission basis and
  4. processing of bulk mail.

7.3.14 Till the Eighth Plan, construction of buildings has been the single most important activity of the Department. Even during the Eighth Plan, the expenditure under the building programme has been more than the approved outlay, thus disturbing the Plan priorities. The reliance on budget support for financing this activity would be kept at the minimum during the Ninth Plan period, keeping in view the more important competing needs of programmes like expansion and modernisation. Alternative ways of financing this activity, including use of Postal Life Insurance (PLI) funds need to be explored and appropriately developed.

Objectives and Targets

7.3.15 Expansion of the postal network, especially in the rural, far-flung and uncovered areas, and modernisation of postal operations would continue to be the thrust areas during the Ninth Plan. The major objectives of the Plan in the postal sector are envisaged to be:

  1. improving efficiency and quality of services;
  2. mechanisation and modernisation of postal operations;
  3. human resource development through adequate training and facility for skill upgradation keeping in line with the Department's need for technical expertise;
  4. introduction of new and more value-added services and strengthening the existing ones
  5. financial self-sufficiency;

7.3.16 Technology upgradation and modernisation programme would hold the key to the achievement of the above objectives. This programme would be accorded the highest priority during the Ninth Plan. In the area of expansion of postal network, priority would be accorded to the provision of postal facilities in the rural, hilly, tribal and difficult areas. The major targets/schemes envisaged for the Ninth Plan are :

  1. opening of 2500 rural post offices (EDBOs) and 250 urban post offices (DSOs);
  2. installation of 5000 Multi Purpose Counter Machines;
  3. modernisation of 1025 post offices;
  4. modernisation of 100 mail offices;
  5. setting up of satellite-based money transfer system with one hub, 200 VSAT and 2000 ESMOs;
  6. setting up of automatic integrated mail sorting systems in three major cities;
  7. computerisation of Regional Postal Life Insurance operations in 32 regions with upgradation of computers in 20 circles;
  8. construction of postal buildings and staff quarters;
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