DoP stamps out French connect in parcel entity

NEW DELHI: Can a foreign public utility company compete directly with another such entity in the latter���s home turf? The Department of Posts (DoP) doesn���t think so. The DoP has objected to the plans of GeoPost���French state-run postal services utility La Poste���s subsidiary���to acquire a controlling 60% stake in Indian express parcel delivery firm Continental Air Express. The proposal, formally rejected by the foreign investment promotion board (FIPB), could set a precedent, given that the India Post Office Act is in the process of being amended and one proposal calls for a FDI cap in Indian courier companies.

Continental Air Express is part of a Delhi-based privately-held group, Continental Carriers, owned by the Vohra family. The group has various businesses, including air export services, ocean services, import services and air travel services, besides air express services.

La Poste is the largest corporate employer in France with about 3 lakh on its rolls and contributes about 1% to the country���s GDP. It had reported a E20.1-billion turnover in 2006, of which 15.2% came from the international market. The DoP���s objections are on two counts. First, the proposal is akin to La Poste making a ���backdoor entry into India���.

As per global regulations, an operator seeking to establish an Extraterritorial Office Of Exchange (ETOE), i.e. a postal services operation overseas, needs to get an ���agreement��� from the respective member of the Universal Postal Union (UPU). This means that GeoPost would need an okay from Indian authorities as India is a UPU member.

Switzerland-based UPU is the global forum for co-operation between postal-sector players. The 191-member specialised United Nations agency sets rules for international mail exchanges and makes recommendations for growth. Second, as pointed out by DoP, the India Post Office Act is being amended and it could also affect the express parcel industry. The amendment proposals, which have become controversial, called for imposing a 49% FDI cap in Indian courier companies.

Currently, FDI up to 100% is allowed in courier services for carrying packages, parcels and other items that do not come under the ambit of the India Post Office Act. While the FDI policy does not draw a distinction between investment made by a foreign private firm and a foreign government-owned entity, DoP���s prime objection in this case is with respect to La Poste���s move to circumvent UPU regulations.

GeoPost had argued that it is a separate La Poste business that focuses on premium parcels and hence, UPU obligations do not apply. Moreover, its operations in other countries have not triggered such disputes with local operators. GeoPost had also cited DHL���s example, wherein the majority stake is held by Germany���s Deutsche Post, which is also a UPU member, but is operating in India.

However, DoP has countered this argument, saying DHL had an operation in India much before it was acquired by Deutsche Post. DoP has also said GeoPost is a subsidiary of La Poste and should be seen as part of the UPU obligations.