CHQ R IV Letter to Department on Terms of Reference on Mckinsey & Co.

To
Smt. Radhika Doraiswamy
Secretary Dept. of Posts
New Delhi 110 001.
Madam,
Sub : Terms of Reference on Mckinsey & Co. – AI RMS & MMS EU MGs & MSE views.

AI RMS & MMS EU MGs & MSE has sought to get the terms of reference made by the Department
when it called for expression of interest (EOI) and request for proposal (RPF) in 2009 for the selection of a consultant for mail network optimization project of Department of Post .We now understand that MCKinsey and Co is handling this project. Having gone through the above reference, AI RMS & MMS EU MGs & MSE  has the following points/proposals/ suggestions and demands, which we except the Department of Post to consider:

1. We are happy that the Department is seriously looking at the mail network optimization, which is our core business and welcome any initiative in that direction. However, we would like that the Department hears the Workers’ suggestions, represented by AI RMS & MMS EU MGs & MSE and other unions, before any action to implement any new idea/venture/modifications of the existing system, discuss and debate and then act of consensus.

2. We feel that the terms of reference itself carries lot of contradictions. For example, at para 1.7, the Department’s objective to double its mail volume and corresponding revenue by FY 2014-15. There is nomention of any profit target there, where as at para 2.1, it talks about“…the ambitious growth and profit targets set by the India Post…”. Revenue is not Profit, we all know. So far Department has not set any profit target. It has not even fixed, a target date for getting out of deficit support. This is one example. These need clarifications and discussion.

3. At para 1.7 from para 1.7 (a) to 1.7 (f), six mail business projects are already listed as being conceptualized, whereas at para 3.1 (scope of work), the consultant has to define the new structure, including preparing a business plan. we have already decided on projects, did we do it without a business plan? If we had, where is the need for a consultant?

4. While we appreciate the thrust sought to be made in the mail area, we are worried that the revenue/profit dimension is narrowly sought to be achieved at the cost of the poor and rural population and workers of the Department, as certain inherent cues in the reference indicate. We want to elucidate this logic: Any business plan to make this Department profitable should start with the Vision of the Organisation: “India Post to be a Socially Committed, entrepreneurially managed, technology driven and self-sustained organization.” Any business plan should satisfy the above vision, in the context of detailed analysis of the internal and external environment. A self-sustained enterprise should get rid of the dependence on subsidy. But can the drive for this come from the mail business alone, given the differential growth rate of mail for the underprivileged Vs the business mail? The way the reference is worded, one gets the feeling that this is what is planned, namely to bring down the service levels of the under- privilaged:
i) Term 1.7 (co says : “…establish 230 mail business centres through restructuring of existing mail offices and network optimization”. We feel while the intentions may be good, the process may not be. Social commitment is for the poor, rural and far-flung area people as well. Social commitment is to generate and sustain employment for the disadvantaged people in those areas as well. From the way the number of mail offices to be rationalized  are pre-dertermined even before the consultant gives his views, makes us believe that the Consultant’s report is sought to be made a fait- acompli. Department of Post is part of the Nation’s overall economy and its rationalization cannot marginalize one section. This needs further and wider discussion and debate.
ii) Mail business segments into two areas-normal mail, largely used by the poor and underprivileged growing at a rate and the business mail of more affluent, growing at a faster rate, calling for cultivation vis-à-vis  competition. While it is conceded,  Mail business centres located at select mail offices can build up the  second category business, it is equally true that in many cases better business can be achieved by location them in HOs /large Post Offices/ new locations. The fact that the reference specifically talks about 230 Mail offices for the location of Business Mail offices in 230 Mail offices through rationalization makes us wonder if it is an indirect way to abolish mail offices. Thus, we call for detailed discussions on this issue.
iii) We all know that the largest growth of business mail is in the seven metros- Delhi, Chennai, Kolkata, Mumbai, Bangalore, Hyderabad and Ahmedabad, followed by a few more cities. One must naturally concentrate on these cities for building up business mail potential and thus Mail business offices there. Instead the attempt appears to be indirectly abolish mail offices in 230 places in the name of building business mail. Technology induction by way of Automated Mail processing Centres should be first concentrated in these cities. Even there one must look at the characteristics of Indian Business Mail, not all of which lend themselves for automated sorting. Not even in USA it has happened. Even with good growth of business mail in Mumbai and Chennai, where Automated Sorting exist, the business mail processing through these automated centres is low, everyone knows. Under these circumstances, setting up of 14 such centres within 3 years 2011-2014, as indicated, will lead to heavy loss, with no commensurate benefits. This pre-determined notion, as reflected in the reference, calls for discussion.
iv) We are afraid that what is sought to be achieved by way of rationalization is closing down of many mail  offices, which in reality will affect the growth of revenue and add to cost. Sure enough, some mail offices  deserve closing but they are far and few between. Many mail offices vitally serve rural and far-flung large  areas. A case by case approach is needed. An out side consultant is not the ideal one to do this. We are open for discussions and not for omni-bus decisions. By closing many of them we will breach the vision to serve with Social commitment
v) We, India Post, not only operate mail business, operate Banking, Insurance, reatailing etc. The Finance Marts, when they emerge as full Bank, can go a long way, along with Insurance and Business products, in generating  even profits and cross subsidise our mail business, fulfilling our vision of “social commitment” and “self- sustained growth”. One has to take a more over-all view than to stick to per notions of abolitions of offices and posts, in the name of rationalization, eroding our competitive advantage of net work, committed work force and social relevance.
vi. At para 1.4 a wrong diagnosis is made. It tells about non-viability of our transport system. Far from it. Large areas of our transport system are still relevant and cost-effective. Railways still offer on most areas a good and  cost effective means of transportation. Our Departmental Mail Motor Service (DMMS) is efficient. The managerial decision to keep it confined to cities is incorrect. With the growth of road networks and out Logistics Post and EPP, DMMS has a vital role to play. The uncharitable reference to DMMS in that para is not-justifiable and sets a wrong premise for the consultant to examine. With the growth of Geographic  information System (GIS), DMMS if allowed proper mobility and support can in fact accelerate Business Mail Growth. This needs discussion.

5. AI RMS & MMS EU MGs & MSE strongly feels that the narrow focus on mail network rationalization  along, without examining the full network Post Offices, Banking, Insurance etc. is not correct. In this connection we wish to know what happened to the earlier consultant’s, KPMG, report. Have we used that report? May be it  should be referred as well. In short, AI RMS & MMS EU MGs & MSE rightly calls for a wider and detailed discussions with trade unions before we seek Mckinsey’s help, inter actions with Mckinsey to present Trade Unions’ point of view and implementation of any recommendations only after a consensus with unions emerge. While we are willing to cooperate for the new and useful mail arrangements, our support will be based on the willingness of administration to work with us as well.