India Post: A story of missed opportunities [Part III: Direct Benefit Transfers (DBT)]

India Post is a unique institution in many ways. The most important aspect of it is however its extensive network that has capability to deliver tangible as well as intangible goods to almost anybody residing anywhere in the country. Various social groups, particularly those difficult to be reached, can be included in the process of development while leveraging this infrastructure. Few low-income countries can boast of possessing such rich physical network capital.

An organization as old and as deeply entrenched in traditions as India Post needs to keep reinventing itself if it aspires to remain relevant in a rapidly changing political-social-economic landscape. India Post has however been exhibiting massive inertia to change at fundamental levels even in the face of some very potent opportunities during the recent years. India Post story may be one of the most remarkable post-Independence stories of missing almost all possible opportunities to become a far more effective partner in the growth and development process of India than it currently is.

In the first part of this blog story I discussed how (and why) India Post missed out on an extremely important opportunity of delivering microfinance to the financially excluded households of India despite the fact that it was almost ideally placed to do so. In the second part of the story I discussed how a historic opportunity was let go by India Post to become a hugely important public institution in rural India while facilitating transformation of rural lives and livelihoods through common service centres (CSCs). In the third part of the story I will discuss how despite having capabilities to deliver various social protection programmes India Post did not put forward its case strongly, which resulted in the concerned government agencies looking towards other entities and spend money towards creating parallel networks. It could have been avoided if India Post had offered its network for delivering such programmes. India Post’s involvement could have also avoided exclusion and inclusion errors in the programme delivery as is borne by the evidence presented below.

In view of its capabilities it is not surprising to note that the first ever experiment in India to deliver social security benefits directly to the beneficiaries through bank accounts was initiated by India Post back in the year 2003. Not many people within even India Post are aware of this fact, let alone being proud of it!

Widows living below poverty line (BPL) are entitled to monthly pension in all states of India. Contribution by state governments towards the pension varies from state to state but a major chunk of funds for the programme is provided by the central government. When I was director postal services (headquarter) for Gujarat circle, secretary, women and child development department, government of Gujarat, and I collaborated to experiment with delivering the BPL widow pension through the bank accounts in their own names. The collaboration entailed the post offices to identify and open savings accounts of all the widow beneficiaries. Before opening the accounts I offered to the state government to verify credentials of all the beneficiaries to remove inclusion errors. The verification revealed that out of 130,187 widows drawing the pension in the state as many as 10,353 did not fulfill the eligibility criteria for receiving such pensions.

After the savings accounts of the remaining beneficiaries were opened, all the state government needed to do was to provide a single cheque to the general post office at Ahmedabad for the entire amount to be disbursed along with a list containing details of all the widow beneficiaries. Money being directly credited to the widows’ accounts had obvious benefits of the women receiving full amount of their pension and having total ownership over their money. As BPL widows constituted arguably the most vulnerable social group in the state, almost none of them ever had a savings account. This exercise resulted in all of them having savings accounts in their own names. I negotiated with the state government to pay 5% of the total disbursed amount at par with the commission charged by India Post for its cash remittance services. After deleting the names of ineligible persons and thus removing inclusion errors and the resultant leakage of funds. In all, accounts for 115,000 women were opened across the state. By December 2009, the post-offices had earned revenue of INR 182.7 million through this activity, in addition to the commission earned on each of 115,000 accounts every year from the Ministry of Finance.

That Gujarat experiment of direct benefit transfers (DBT) through post office savings accounts was successful without any assistance of digital technology, which was only possible for such an extensive network as India Post. One can easily imagine the enormity of the potential of this network if it is effectively digitized.

When national rural employment guarantee programme (NREGP) was initiated, the then Andhra Pradesh (AP) postal circle offered to the AP government to replicate Gujarat widow pension DBT model to pay wages of laborers under NREGP through post office savings accounts. Postal administration in other circles also entered into agreements with their respective state governments. Banks then realized the significance of such transfers and started offering their services to various state governments. Meanwhile it was becoming difficult for managing large scale transfers for post offices without the aid of technology as NREGP was expanding rapidly. Banks in such a situation offered better services, particularly in areas where they had reasonably good presence, riding on their already existing technology platforms. Banks also made efforts to develop their business correspondent networks equipped with appropriate technology in unbanked areas. Situation is still quite fluid but the post offices are increasingly losing their ground in DBT space as they have still not been able to digitize their network.

The first step in this regard could have been to partner with one or more banks with footprints across the country. This could have been on the existing business correspondent model or some even better customized model leveraging divergent strengths of the banks and post offices. However, nothing of this sort happened despite advocacy by several external experts and a part of Postal Management, including myself, as the topmost manager-policymakers were living in their own make-believe worlds, and were driven by some irrelevant and unfounded organizational egos. They argued that they were much bigger than any bank in the country and it would be demeaning for India Post to work as their business correspondents.

The next obvious step was to ensure digitization of the entire postal network as fast as possible. As I discussed in the Part II of this blog story, India Post had an opportunity to digitize its rural network way back in 2006 when Government of India had allotted adequate funds to establish 100,000 common service centres (CSCs) under National e-Governance Plan. Another opportunity arose after the Government of India constituted Unique Identification Authority of India (UIDAI) in the year 2009. India Post could have approached the authority to become its partner and have offered its extensive network for issuing unique identity (Aadhaar) to citizens of India. The UIDAI resources could then have been used to computerize the entire rural network, and non-computerized urban network, of post offices. Post offices could then have been integral part of all the initiatives to be linked with Aadhaar including direct benefit transfers. Not only India Post did not approach UIDAI for such partnership it also scuttled all suo moto offers from UIDAI to provide digital technology to rural post offices free of cost. Postal top management based their argument to reject the offers from UIDAI on such flimsy grounds as in the situation of accepting UIDAI’s offer the ownership of technology project initiated for digitizing post office network would be appropriated by the Ministry of Finance. It is pertinent to mention here that even at the time of writing this blog India Post has still not been able to digitize its rural network under its own technology project. It has already wasted precious time and has irretrievably lost the space for DBT to other players.

In addition to losing great opportunity to make itself once again greatly relevant to the people of India and significantly improving their account books, India Post is also doing great disservice to the deprived Indian population by denying them an efficient, convenient, and cost-effective way of accessing social protection programmes.


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