Can government owned economic organisations of two separate countries play in the same market? The Foreign Investment Promotion Board (FIPB), the nodal agency that clears foreign investment proposals, has given a green signal to GeoPost, the French government-owned postal services company, to acquire 60% stake in the privately-held Delhi-based express parcel delivery firm Continental Air Express (owned by the Vohra family) for an undisclosed amount.
The proposal has been cleared with some riders after the French ambassador to India, Jerome Bonnafont intervened requesting that it be cleared, according to this report.
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 international regulations. Switzerland-based UPU is the global forum for co-operation between postal sector players. It is a specialised agency of the United Nations that sets the rules for international mail exchanges.
FIPB had in March 2008 rejected the proposal after the department of post(DoP) raised reservations against what it termed a ‘backdoor entry into India’. It also accused the French firm of violating global postal conventions. DoP’s view was that as per global regulations, any postal operator seeking to establish operations outside its national territory would require an agreement with the respective member of the Universal Postal Union, in this case India.
GeoPost had argued that it is a separate business owned by French government’s La Poste that focuses on the premium parcel segment and as such the UPU obligations do not apply to it.
The green signal to GeoPost could also set a precedent. The India Post Office Act is being amended and one of the proposed changes calls for limiting foreign investment in courier companies to 49%. This could be another reason why the French ambassador was pushing the GeoPost case.
GeoPost has been allowed to buy into Continental on the condition that it will not get into delivery of letters and postal parcels and other activities reserved for local postal operators by the international convention. Moreover, it has been asked to restrict its operations to B2B express parcel delivery segment with an additional rider that each parcel shall weigh more than 2 kg.
La Poste is the one of largest employers in France with about 3 lakh people on its rolls and contributes about 1% of the French GDP. In 2007, La Poste Group’s turnover was euro20.8 billion with international revenues representing 16.1% of the total.