Chennai: The recent losses posted by government-owned agencies such as Air India and BSNL left the industry and many investors reeling. However, a recent report has noted that the industry has lost sight of the elephant that is in the room, which had enclosed within itself, huge losses.
According to the report, in the past three fiscals, the revenue deficit of the Department of Posts, trading as India Post, has gone up nearly 150 per cent from Rs 6,007 crore in FY16 to Rs 15,000 crore in FY19.
High pay and allowance costs that ate up over 90 per cent of India Posts’ annual revenue meant the entity eclipsed losses of both Bharat Sanchar Nigam Ltd (BSNL) and Air India combined.
BSNL, which had reported losses of around Rs 7,992 crore in FY18, is expected to narrow it down to Rs 7,500 crore for FY19, while Air India had posted a net loss of Rs 5,337 crore in FY18, down over 17 per cent year-on-year, said the report by The Financial Express.
India Post’s pay and allowances cost reportedly stood at Rs 16,620 crore in FY19 (revised estimate), against revenue of Rs 18,000 crore.
Factor in pension payouts to the tune of another Rs 9,782 crore, the employee cost adds up to Rs 26,400 crore in the last fiscal, nearly 50 per cent more than the total receipts, the report said.
The entity, which runs the world’s largest postal network along with popular savings schemes, a payments bank and, more recently, even an e-commerce portal, has projected revenue of Rs 19,203 crore for FY20.
On the other hand, the expenditure on salary and allowances for its massive 4.33 lakh workforce is pegged at Rs 17,451 crore while pension outgo is expected to be around Rs 10,271 crore. So the revenue-deficit gap is only set to widen further in the next fiscal, it added.
According to the report, India Post spends on an average Rs 12.15 on each postcard but realises only 50 paise or 4 per cent of the cost. Similarly, the average parcel service cost is Rs 89.23, but recovery is only half of that.
The under-recoveries are also pretty high for services such as Book-Post, Speed Post, registration, et al. Furthermore, revenues have taken a hit from dropping volumes as letters, telegrams and parcels have given way to phone calls, emails and courier companies, it said.
In the past few years, the body has already diversified into new areas – setting up Post Shoppes, selling financial products like sovereign gold bond, mutual fund and insurance, offering passport services and selling railway tickets. But these initiatives generated Rs 844 crore in 2018, while the bulk of its revenue still comes from the National Savings Schemes and Saving Certificates. This had contributed 60 per cent of its revenue of Rs 11,511 crore in FY17.
The report mentioned that India Post is betting big on e-commerce, for, the segment is growing at a rate of 20-25 per cent a year, and an average of 7,753 people are served by a post office in the country – 5,995 people in rural areas and 23,720 in urban India.