Postal reforms untimely, says MPs' panel

Postal reforms untimely, says MPs' panel

	Published : Tue, 20 Dec 2005 20:05 By : Paula Demarzio Print this Story

LONDON: The British government's decision to open up the postal services to competition drew criticism from MPs, who described the step as "untimely". They warned that the decision could affect Royal Mail deliveries in the country.

The Trade and Industry Select Committee of the MPs, which is studying the impact of competition on the postal services, said the decision has come at a time of commercial uncertainty, especially when Postcomm is reviewing the rates for its regulated services and when the company is facing "huge challenges in addressing its pensions deficit and investment needs".

Conservative chairman of the committee Peter Luff said the committee is really anxious to protect a universal service similar to the one at present. "If competition is more intense than people are expecting, the universal service could be threatened in all kinds of ways, particularly as private sector operators cream off the more profitable parts of the market," he said.

Royal Mail had recently announced increase in stamp prices in an attempt to overcome its financial problems, notably a pensions deficit of 4.5 billion pounds.

The committee said opening the market to competition did not pose a threat to Royal Mail's obligation to deliver across the country for the same price, but the regulator should be vigilant to ensure that competition in postal services does not come at the cost of universal service. It said any universal service that had exemptions like rural areas is "not worthy of the name".

Luff said if the competition is more intense than people are expecting, the service could be threatened, particularly as private sector operators can opt to operate in the more profitable parts of the market.

Apart from the pensions deficit, Royal Mail needs investment -- estimated around 2 billion pounds -- for modernisation of its sorting. The regulator has allowed a price regime for to ensure an average of 320 million pounds going into the pension fund to clear the deficit and an investment of 1.2 billion pounds for the modernisation.

The committee is of the view that the customers of Royal Mail alone should not be expected to foot the pensions deficit. The government should also pool in funds, including waiver on dividend payments.

Royal Mail delivers 82 million letters and packages a day. While the rate hike is on the anvil, it has cut jobs and closed down offices and stopped its second delivery system to improve its finances.

The government, which converted Royal Mail into a corporate entity since March 2001, has a majority holding through the department of trade and industry. The rest of the shares are held by the company. The government received more than 2,300 million pounds as dividend since1984 and stopped accepting it since 1999 helping the company to use the funds for improving its working.

Private operators are allowed since January 2003 to handle bulk mail for businesses. The main private operators are Business Group Plc, TNT Mail, the U.K. arm of TPG NV and Deutsche Post AG's DHL unit.