Choking competition or just shooting the messenger?

A new move by the Department of Posts (DoP) is aimed at putting global logistics giants out of business in India. The likes of UPS, DHL and Blue Dart are a worried lot fearing a cut in 50% of their business in India and other smaller players are keeping their fingers crossed against a decision that might just make them close their shops.

The DoP is contemplating on introducing a law that prohibits private courier companies from carrying letters or packages lighter than 500 gms. This essentially means they private courier companies would not be allowed to carry letters/documents and small packages. In today's scenario Indian businesses rely heavily on private courier companies to carry all sorts of documents and deliver packages to their and consumers' door steps. There is greater accountability and reliability with the private companies. The move would means that books, gizmos, magazines, and anything else which can fit into a 'small package' will now be delivered solely by the Indian Postal service (IPS). We all know how fast this service has been. The slowly growing B2C e-commerce is likely to suffer a set-back.

The only service that can compare itself for speed provided by the private couriers is the Express Mail Service or EMS and it is a premium service offered by IPS. While the postal service may have the largest network, it by no means has the sophistication that the private players have been able to build into their offerings. Features like tracking a package in real time from the minute it is picked up till the minute it is delivered are some distance away, yet, for IPS. The private players also offer value added insurance features that users often find convenient. The promise of timely delivery has been unmatched by the IPS, so far.

While the ministry has been rationalizing this move as being done to amend an archaic law, about 108 years old, there has been no reason provided for why the competition should be effectively stymied all for amending a law? Why the IPS should be given an effective monopoly on light-weight packages. The implementation of the act would be against the spirit of restricting monopoly. The Postal department has been tight-lapped about it since the industry has started dissenting the move.

The act in a long shot will only give wrong signals to the FIIs who are bracing themselves for a tremendous growth that they foresee in India's pacing liberal economy. With the decisions on FDI in retail impending, and likes of Wal-mart trying to gain foothold in the Indian market, the move is bound to be unpopular with the prospective investors.

It is likely that the move may not happen the way it has been currently announced to be implemented. But the department and the Competition Ministry should work in coordination before voicing out amendments that are bound to be anti-private sector and purport to choking competition.