The proposed bill to reserve delivery of letters below 300gm for India Post will mean a revenue loss of Rs 2,000 crore for the courier industry.
10% revenue share, ban on sub-300 gm packets will make industry unviable.
MUMBAI: The proposed bill to reserve delivery of letters below 300 gm for the government-owned India Post will mean a revenue loss of Rs 2,000 crore for the courier and express industry, according to industry spokesmen.
The shares of express companies crashed on Friday, with Blue Dart, Skypak and Patel On-Board Couriers dropping around 5% each.
On Thursday, the department of posts unveiled a draft bill that would not only forbid courier agencies from carrying sub-300 gm letters, but also impose licence fees and a 10% revenue-share based universal service obligation (USO) to finance unviable post offices. An independent regulator has also been proposed for the mail industry, apart from licence fees of varying levels for small and big courier companies.
The express industry is aghast. "If the bill is passed, private players' revenues worth Rs 2,000 crore will be wiped out in one swipe," says the chairman of the Express Industry Council of India (EICI), RK Saboo. Though the bill will impact different players differently, the industry estimates that 50% of its Rs 4,000 crore revenue is generated from shipping lettered documents below 300 gm.
Another worrying aspect is the 10% USO based on turnover. Since courier agencies already pay service tax of 12.24%, the USO will push courier costs up by nearly 22-24%, making them unviable. "This is unfair and will make us very uncompetitive. The whole policy seems to be geared to kill us," says the senior official of a major express company
The proposal has sent shivers down the spines of major firms like AFL Pvt Limited, UPS Jetair Express Pvt Ltd, Blue Dart Express Ltd, First Flight Couriers Ltd and others, as it would erode a substantial portion of their revenues.
AFL officials say that 99.5% of their express business comprises lettered documents weighing less than 300 gm. For UPS, it is just about 10% in terms of volume.
According to Saboo, express companies have invested heavily over the years to build infrastructure for air and road shipment of documents. All this would go waste if the draft bill gets the nod.
Abheek Mitra, managing director of TNT India, says the proposal will adversely impact proposed investments in the sector. TNT, which launched its service in India two months back, has committed to bringing in Rs 550 crore over the next five years, but now the company may revisit that decision.
"The proposal is retrograde. It will make many serious players rethink their plans of putting money in this market. I fail to understand why the government is taking such damaging step when there is so much enthusiasm among private players to invest in this industry," says Mitra.
Hundreds of small courier agencies will also be affected by the new law. "Many of the smaller players would lose their livelihood. It would result in a heavy loss in terms of employment, too," adds Mitra
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