Department of Posts Modernisation Project Caught in a Corporate Time Warp

The Department of Posts is one department, which is rarely talked about in public and normally does not figure in the vision of most policy-makers and decision-takers. But it is a department, which offers a wide range of financial and insurance service, apart from core postal services, which are important for empowering the common man. It is also the only department that touches each and every individual’s life almost on a daily basis. Not to mention an unimaginable network that ensures that your mail or packet is delivered on time. And most of its operations are handled manually or with least computerisation! It is difficult to assess the efficiencies that would be injected into the system, if modernisation were to take place.

One thing that Kapil Sibal, Union Minister for Communications and Information Technology really wants to get right is the modernisation of India Post. To this end, an IT modernisation project was envisaged. The Project proposes to modernise and upgrade all post offices across the country by building the required infrastructure for computerisation and ensuring networking facilities. The ‘India Post 2012’ project was cleared by the Cabinet Committee on Economic Affairs in August 2010 at an overall outlay of Rs 18.7 billion, with the aim to transform Department of Posts into a “Technology Enabled, Self-Reliant Market Leader”. This translates into 5 initiatives covering increased market share and revenues, new products and services, improved services delivery, motivated workforce and rural development.

It was in January this year that the Union Government shortlisted three companies – HP, TCS and HCL Technologies – for what it said was a project that would take inclusive growth in the country to another level. Global IT major HP appeared set to win one of the biggest e-governance contracts in India, having supposedly outbid other shortlisted giants.

Consider this, the DoPs IT modernisation project involved computerisation and networking of 155,000 post offices; core banking solution for ‘anytime anywhere banking’ through post offices with ATM facilities; delivery of banking, insurance and mailing services in rural areas through hand-held devices; post offices to become hub of social security payments through the digital network; and, setting up of a Postal Bank of India to extend micro credit and other loans given its outreach. Sibal terms the department as agents of change that could play a huge role in promoting government’s agenda for inclusive growth.

It is a project on which the government’s over Rs 18.7 billion project for modernising the DoP rests. At the heart of this modernisation project was the Core System Integrator (Core SI) contract for which these three companies had been shortlisted. But doing business in India is never easy, as has emerged in the recent round of scandals that are rocking the government. And, this becomes especially difficult for a department that does not make too much news. What is perhaps more inexplicable in declaring the winner is the fact that of the eight RFPs (request for proposals) the government had invited for modernising and upgrading the DoP, it is this project that the other contract will ride upon. So, while some of the other projects have already been finalised, little can be talked about their future since the base technology they will use will be with the company that executes the CSI project.

For an organisation that has a predominantly rural-based network-over 139,000 post offices are in rural areas, with only around 16,000 in urban areas – Project Arrow sought to achieve a big increase in both customer satisfaction and employee satisfaction with India Post. It envisaged a pan-India network that would be flexible enough to support future applications, leading to greater accountability and productivity through the use of technology and improved working conditions. Drawing heavily on the report of an expert committee under the chairmanship of Ajay Shah of National Institute of Public Finance and Policy (NIPFP), the government sought to synergise technology, banking and postal services in order to achieve the larger aim of financial inclusion.

Experts say it is unlikely that there would be effective financial inclusion in the country without the active involvement of India Post. “If financial inclusion is to be meaningful, a time-bound action plan should be undertaken to set up a full-fledged postal bank. In- principle agreement is required immediately as the modalities would require in-depth work.” It was a point reiterated by Sibal recently that “we have started the process of formulating the National Postal Policy with a two-pronged approach – to develop services that assist, facilitate, enhance and quicken the process of development aimed at inclusive growth, and repositioning India Post to make it a self-sufficient, efficient and cost-effective provider of these services.”

But for Department of Posts to be able to provide such self-sufficient, efficient and cost-effective services, it needs to introduce several technological innovations, all of which appear to have got mired in some controversy. While the department is looking at various solutions as a part of its modernisation drive and to increase its operational effectiveness, it is the delay in decision-making on the core system integrator that is rendering the whole move ineffective. This is because it is this system that will integrate and bring together all the other systems (Rural ICT-Hardware; Rural ICT-System Integrator; Data Centre; Financial Services System Integrator; Network Integrator; Mail Operations; and, Change Management) making DoP a single enterprise.

If financial inclusion is to be meaningful, a time-bound action plan should be undertaken to set up a full-fledged postal bank. In- principle agreement is required immediately as the modalities would require in-depth work

While the key target of the DoP is to synergise its existing business modules – logistics, banking and additional business – into a single plan, touching all points through a single interface, it is its failure to decide on who will provide the spine of the service that has sent all plans into a tailspin. Thus, while the DoP has already started to scout for a consultant to prepare a roadmap for the proposed Postal Bank it is the delay in finalising the successful bidder for the CSI that is costing it dear. If no decision is taken, the government will have to issue fresh tenders thereby delaying the whole process by almost another year or more likely post-2014 elections.

An early decision on the CSI would enable the bulk of the population, especially the poor, to access various financial services like loans, insurance and deposits supporting their livelihood.

It is undoubtedly one of the most transformational projects ever undertaken by a government department. The reasons causing delays are many, biggest being the freedom of deliberation that the democratic process allows. While it leads to true participatory democracy, in many cases it acts as a stumbling block. In this case as well, each time the committee is close to taking a decision, technical objections are raised by various Members of Parliament. Ministry of Law steps in, to whom the matter is referred for seeking clarity. It has already happened twice. The matter is with Ministry of Law again seeking a clarification on a single point. The matter is expected to return soon to DoP! It would be anyone’s guess, when?

As the Planning Commission has noted, the DoP needs to ensure generation of substantial additional revenue through non-tariff methods like introduction of IT-based financial services and introducing a corporate set-up that will provide it with two intrinsic advantages – faster decision-making and raising resources from the market. In view of this, corporatisation and modernisation of the Department of Posts in a time-bound manner is imperative.