Monday, December 3, 2001, Chandigarh, India






National Capital Region--Delhi

THE TRIBUNE SPECIALS
50 YEARS OF INDEPENDENCE

TERCENTENARY CELEBRATIONS
B U S I N E S S

Y O U R  M O N E Y
A GUIDE TO PERSONAL FINANCE

Buying a previously owned car
T
he most expensive purchase of a family is a house. Most people put in a life’s savings into this single purchase. Diamond necklaces not being in the running, the second most expensive item a family buys is a car. Often, financial restraints make it necessary to buy a previously owned -read second hand car.

HOW I INVEST

Debt funds, banks are best options
A
very cautious investor, Mr G S Channi, Head Punjab, Centurion Bank with his 25 years of experience in the banking sector, believes that investment planning needs to be done right from the day one starts his career . Atleast that is what he did and his planning involved a cautious spread of his investments over different areas.

VIDEOS
The largest dry fish market of the country in Marigaon is facing its biggest ever crisis as a government imposed sales tax liability is reducing profit.
(28k, 56k)
The collapse of Enron is likely to effect the negotiations with the US companies and the Indian government.
(28k, 56k)



EARLIER STORIES
 

CHECK OUT

Enact law to protect consumers
A
consumer recently recounted the problems that she encountered in getting a refund on a pair of defective shoes that she was sold. She had bought the shoes for her son and when the sole of the shoe came apart within two months of purchase, she took it back to the retailer demanding a refund.

MARKET SCAN

Sterlite Industries a good investment
D
uring the last week, the stock market indices slipped-down a bit. The reason is obvious. Now that almost all second quarter results have been announced, there is no news to put the stock market on a boil or to make it cool-down. In fact, till the 3rd quarter results are announced, the stock market is likely to move with a narrow range.

TAX & YOU

  • Ex-graha amount
  • Retirement benefit
  • Senior citizen

India turning young: PM
Hyderabad, December 2
Calling for a broad-based management education system that enriches the skills of professional workers, Prime Minister Atal Behari Vajpayee today said the knowledge-driven economy provided great opportunities for India to emerge as “the young nation”.

Reliance interested in DPC
Mumbai, December 2
Reliance Industries Ltd (RIL) appears to be interested in acquisition of embattled US energy major Enron’s Dabhol Power Company (DPC) through city-based power utility BSES Ltd, in which it is the largest stakeholder.

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Buying a previously owned car
H. Kishie Singh

The most expensive purchase of a family is a house. Most people put in a life’s savings into this single purchase. Diamond necklaces not being in the running, the second most expensive item a family buys is a car. Often, financial restraints make it necessary to buy a previously owned -read second hand car.

This can be a dangerous and risky move, especially for a first time car owner. There are so many ways to cover the shortcomings of an abused car. Indian car owners are notoriously famous for not insuring the maintenance and upkeep of their car. In short, the car may not be roadworthy.

In such a situation, your best bet would be to take along a mechanic or a friend who knows cars.

A visual inspection of the exterior, in detail, will give you a very good idea of what lies inside and then may be under bonnet. Original paint speaks for itself. A re-sprayed car is easy to detect. Spray marks on the door handle, rubber beading or glass area that have left behind. It shows the work of a sloppy painter and “it doesn’t make a difference” attitude of the owner. A good paint shop will tape-up areas not to be painted and during the rubbing and polishing, the final in a paint job, spray marks will be cleaned with thinner.

Has the whole car been repainted? Why? It would point to an accident. If not a collision, then to remove bumps, nicks and dents that the owner has collected over the years. Good drivers do not collect bumps, nicks and dents, certainly not enough to warrant a complete paint job. A sure sign of a bad driver.

It could also be a pointer that the owner has cared little for what lies under the bonnet.

If the paint work is suspect, inspect the windscreen. Scratch marks on the glass? Yes! Check the wiper arms and blades. They should tell you when they were changed. The fact that the windscreen is scratched is a sure sign of lack of general maintenance.

If a Rs 50 windscreen wiper blade has not been replaced in years, the chances are that an engine oil and filter change which can cost up Rs 500 has not been carried out regularly.

Inspect the tyres and rims. Worn out tyres or retreads are also a sign of poor maintenance.

Uneven wear on the front tyres shows that the suspension or steering is defective. Again, an indicator that the car was low on maintenance. It takes thousands of kilometres to wear out a tyre unevenly. If it happened in hundreds of kilometres the front end is really sick. Avoid.

Do the rims show rust? Rims collect a lot of mud, dust and slush. Dogs use them instead of fire hydrants. Urine corrodes paint! If not washed regularly the rims tend to rust. The indication of a careless owner. If the rims have been recently repainted, it was to hide the rusting process and the fool would be buyer.

A detailed exterior inspection and you should have come to some sort of conclusion.

Beware of agents

Should you want to proceed with the purchase of this vehicle, ask the owner for the keys. Owner being the watch-word. Beware of agents, touts and other un-savoury characters. Dealing with the owner of a vehicle is a safer bet.

Ask for the documents for the car. The registration certificate (RC) and insurance. Scrutinise these documents carefully. Only original documents will suffice. If photocopies are shown — drop the deal. Interstate car theft and sales are on the rise these days.

It is for this reason that it is prudent to deal with the owner and only accept original documents. Also ask for the owner’s driving licence, any other ID like ration card. At the time of re-registration in your name all these documents will be required. Even if one document is incomplete or not on your possession, you may not effect the transfer in your name. You could have paid for the car, brought it home but the car is not yours. Think - where does this leave you? The police could claim it as a stolen car or a finance company could claim it as theirs.

The keys. The keys are a good indication as to the age of the car and how much love the owner has showered in his car. If the key is a worn out, sliver of brass, the chrome plating having rubbed off, it points to an uncaring owner. Something he holds in his hand every time he enters the cars, starts it, is worn out and be did nothing about it.

Now, if he hands you a key that has been duplicated onto an imported key, the episode may have a happy ending. This is a sign of a caring owner.

If the owner presents you a car for inspection, neat, clean and in roadworthy condition. This car wont have nicks bumps and dents. No scratches on the windscreen. This car is worth considering as a buy.

Check documents

Get into the car, sit in the driver seat and take your time. Check the mileage, the date of manufacturer from the registration certificate (R.C). Think! it is a five road car with only 30,000 km on the odometer i.e. 6,000 km a year. What does the owner do to drive only 500 km a month? This is well below the average of a normal cars running. It should be suspect.

Other fitments in the interior that will show you the age and usage of car. The steering wheel and gear shift knob. For sure they are handled every minute of driving. They will be indicators of the usage of the car. Steering wheels and gear shift knobs take thousands of kilometres and years to wear out.

Check the ash tray, the glove box. How clean are they? The upholstery, the floor mats or carpets are an indicator of the age of the car.

The rubber on the foot pedals, the accelerator brake and clutch is also an indicator of the usage of the car. Most agents will ignore this one item. But like the steering and gear shift knob, they show usage and mileage. Worn out pedals are to be directly related to the kilometres on the odometer. They speak for themselves. So the interior passes inspection and scrutiny. Time to take a look under the bonnet. This will be acid test.

The first look at the engine will tell a story. Clean or dirty? This should be the deciding factor. Oil leaks are not a good sign. Anywhere there is an oil leak, dust and dirt will accumulate. The first sight should be on the battery and the area below it. A dirty battery means corrosion, around and below it. Why? A careless owner. To have this repaired and repainted will cost money. It could also mean buying another battery.

Inspect the radiator, the cap, the expansion bottle. There should be no spill-over. A spill-over (coolant overflowing) should be an indicator of a mal-functioning cooling system. It is suspect. Car these days don’t ever heat up unless there is a mal-function. The head gasket could be damaged if the engine has over heated.

If all this is too much for a would be buyer, there is new hope. Some of the manufacturers these days are in the used car business. The previously owned car that the dealer or manufacturer is selling carry the manufacturers warranty, just like a new car. It may include free service. In this case you will have the confidence of owning a factory “once-over” car. One two wheeler manufacturer is offering a new scooter with a one year guarantee and three free service. You can’t do better. You might pay slightly more, but you are paying for peace of mind.
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HOW I INVEST

Debt funds, banks are best options

A very cautious investor, Mr G S Channi, Head Punjab, Centurion Bank with his 25 years of experience in the banking sector, believes that investment planning needs to be done right from the day one starts his career . Atleast that is what he did and his planning involved a cautious spread of his investments over different areas. Equity market can be a good option, but only if one is capable to analyse it properly, but given the present day scenario, he votes for the safe debt based mutual funds and banks.

Initial investments
The first thing that I did when I started earning was becoming a member of the bank’s society for building a house. That I believe has been the wisest decision as building a house for a service class person means parting with quite a large chunk of his income and if one starts it during the initial years, one can go in for the best of investment strategies, that is, earn reasonably and remain safe.

Following that was opening up of a Public Provident Fund (PPF) account which I started with a nominal amount and gradually increased. Then, it was insurance policies — endowment and money back policies. These investments in the beginning assured safety, liquidity as well as tax saving.

Equity Market
It was in early 80s, that is, after around five-six years of my service, that I considered equity market as an option. Reliance, Reliance Petro and Tisco were the shares I invested in and earned reasonably as well. The best strategy to earn in the equity market is not to hesitate while selling . Most people keep holding shares in the hope of multiple returns, which might look possible during initial stages, but ultimately do not actually occur. The moment I felt the equities I had bought are at a point where selling would fetch reasonable returns, I sold them and that proved to be quite a profitable decision.

During later years, say the last three-four years, I invested in a few technology funds and shares like HFCL, DSQ and Infosys. However, today I have only around 10 per cent of my savings in the share market . Equities, I think, can be a good option, but only when one is capable enough to analyse the market and performance of the companies etc.

A sound company with good management would be the best option. However, it is not advisable to enter this sector merely due to the hype.

Mutual Funds
Debt funds and balanced funds are the only two safe options today. I am having funds of Kothari, Birla and ICICI. In case of mutual funds, good fund management, performance of the company should be reviewed before investing.

Real Estate
Not an investment for trading, a house has to be built for living. My strategy has been to buy and sell atleast two three times before one finally settles down during the later years of one’s service. I bought my first flat during the initial years of my job in Delhi, sold it off at profits and bought another in Ludhiana which I am planning to sell again . This way I would be able to own a good house without investments now.

Banks
Banks though have lower returns, but are the most liquid and safest option today. This is very important considering the circumstances the economy went through.

Insurance
Insurance today, does yield good returns apart from the benefit of risk coverage. One must be well insured as it pays well in the longer run. Private insurance companies have come with attractive packages, but their performance is yet to be seen.

(As told to Shveta Pathak)
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CHECK OUT

by Pushpa Girimaji

Enact law to protect consumers

A consumer recently recounted the problems that she encountered in getting a refund on a pair of defective shoes that she was sold. She had bought the shoes for her son and when the sole of the shoe came apart within two months of purchase, she took it back to the retailer demanding a refund. He was, however, unwilling to pay back the money and asked her to choose another pair for the amount of Rs 1800 that she had paid. Her search for a similar pair in the other outlets of the company did not bear fruit. Nor could she find any other pair that suited her son’s requirement. Finally, with great difficulty she persuaded the retailer to return the money that she had paid for the defective shoe, but she says in the bargain she and her son had wasted several days visiting different outlets of the shoe company in the city.

In a situation like this, one would expect a retailer or a manufacturer to be suitably apologetic about the defective piece and offer to refund the money immediately. And if the consumer has had to travel long distance to return the goods, even offer to pay the cost of travel. A smart retailer would also write out a complaint to the manufacturer giving details of the problem, get the customer to sign it and subsequently, inform the consumer about the steps taken to prevent recurrence of such problem in the product and even offer a free trial. And if there are similar complaints from a few other customers, one would expect the manufacturer to recall the entire batch, advertise the fact and offer to refund the cost of the pair to all those who would have bought it.

But the reality is quite different. First of all it’s not easy to get a retailer to accept that he has sold a defective product. And then he will behave as if he is doing you a great favour by allowing you to exchange it. And to get a refund is almost impossible. In fact in cases such as the one mentioned above, the retailer is most likely to write on a piece of paper, the amount that is due from him, saying that the next time you buy something from him, it can be encashed! If you protest too much, he is likely to show you the condition mentioned on the receipt. Saying “Goods once sold will not be taken back or exchanged”.

It is this attitude of retailers and manufacturers that has often forced consumers to seek redress against defective products, before consumer forums constituted under the Consumer Protection Act. And even though the forums have clearly held that such one-sided terms printed on a cash memo are not enforceable, retailers continue to deny consumers their right to a fair deal. In the case of Velan Silks vs V. Susairaj (appeal No. 19 of 1995), for example, where the retailer pointed to the terms “No return, no exchange, no guarantee for colour” printed on the receipt to deny refund on a saree whose colour ran, the Pondicherry State Commission held that the retailer cannot escape liability on the basis of such one-sided terms. The mere mention on the bill that there was no guarantee for colour cannot absolve the retailer of his responsibility. He cannot take shelter under such terms, the State Commission said.

Similarly in the case of Mrs Angela Fonseca vs Coral Lawns and another, the Maharashtra State Commission (appeal No. 14 of 1990) held the terms printed on a cash receipt, saying “advance once paid will not be refunded” to be illegal, unreasonable, inconsiderate and arbitrary. To say that the mere mention of such a condition on the receipt is binding on others or has a legal status is erroneous, the commission said. It also pointed out that such unfair terms printed on the receipt amounted to exploitation of a needy and helpless consumer and imposition of such conditions amounted to unfair trade practice. The Monopolies and Restrictive Trade Practices Commission too has expressed similar views.

About two years ago, the Union Ministry of Consumer Affairs wrote to all the state governments, drawing their attention to the need for protecting consumers vis-a-vis unfair terms and conditions stipulated on cash receipts issued by retailers. Referring particularly to the condition that “Goods once sold will not be taken back or exchanged” printed routinely on cash receipts, the Ministry urged the state governments to take “appropriate action” to protect consumer interest and ensure that such terms are not printed on receipts. Predictably, most state governments ignored the letter.

It’s time the government initiated a dialogue on this issue with associations of trade and industry and the Council for Fair Business Practices. The government should also consider enacting a law that would protect consumers from unfair terms of a contract. In fact the Law Commission of India had recommended such a law many years ago.

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MARKET SCAN

by J.C. Anand

Sterlite Industries a good investment

During the last week, the stock market indices slipped-down a bit. The reason is obvious. Now that almost all second quarter results have been announced, there is no news to put the stock market on a boil or to make it cool-down. In fact, till the 3rd quarter results are announced, the stock market is likely to move with a narrow range.

During the last fortnight, Sterlite Industries and CyberTech Systems have announced their annual results. Sterlite Industries has reported outstanding results for the year ended 30th June, 2001. It may be recalled that Sterlite Industries had demerged its tele-communication business of the company into a separate entity and the face value of its equity shares have been reduced from Rs 10 to Rs 5 per share in June, 2000.

By any standard, the results of the reconstituted Sterlite Industries are outstanding. It has now emerged as the largest copper smelting domestic company. It has also acquired two large overseas mines in Australia which meet 40% of its needs. It has also acquired BALCO and put it into a healthy operation.

It’s net profit is Rs 1279.1 million and its turnover has registered a growth of 36 per cent. It has declared dividend of 110 per cent on the equity shares of the company on a reduced equity capital of Rs 2778.16 million. At present the shares of the company are quoting around Rs 113 per share on the stock exchange. Rs 500 million has been provided for the general reserve. The company’s share premium account stands at 81403.71 lakh and its General Reserve including the profit and loss account stands at Rs 70405.06 lakh. The Sterlite Industries share is quoting at present on ex-dividend basis.

CyberTech Systems, which was quoting a few months back at Rs 15 per share is now quoting at around Rs 42. The amalgamation of the US company with its Indian subsidiary namely CyberTech Information and Systems (India) have been completed. It has announced its results for the previous 15 months, ended 30th June, 2001. Its net profit, after tax, is only Rs 271.84 lakh. But there is every reason to expect improved results for the next year. It may be recalled that the last year it had declared bonus shares. Against an equity capital of Rs 23 crore, it has share premium account amounting to about Rs 39.6 crore and general reserved including the profit and loss account is Rs 17.6 crore.

Both Sterlite Industries and CyberTech System are promising investments, though CyberTech may take some time to grow because of global and US slow-down.
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TAX & YOU

by R.N. Lakhotia

Ex-graha amount

Q: Pre-1986 living retirees are getting ex-gratia amount of Rs 1,000 approximately, per month from nationalised banks, which will continue till death of the retiree. Family members are not entitled to it. Please advise, whether for income tax purposes.

(i) He is entitled to standard deduction, and/or

(ii) 1/3rd of amount as deduction, as the salaried person and the pensioners, respectively.

If not, under what Head, the ex-gratia is to be treated and whether any other facility is available to him.

— Nirmal Singh, Khanna

Ans: The ex-gratia amount received by you will be liable to income-tax under the head ‘Salary Income’ and you will enjoy standard deduction on this amount.

Retirement benefit

Q: I have retired from government service and got retirement benefits. My spouse is a housewife having no source of income and is dependent on me. Can I gift her Rs 7 lakh and will she become an independent Assessee by getting (PAN).

I have placed Rs 10 lakh in the Deposit Scheme for Retiring Govt. Employees 1989.

— J.C. Dhiman, Panchkula

Ans: You should not make any gift to your spouse from the point of view of tax planning. The income arising out of gift to the spouse will be included in your income due to the clubbing provisions existing u/s 64 of the Income-Tax Act, 1961. You may better invest in tax free instruments. The interest received from Deposit Scheme for retiring government employees will, however, be fully exempt from Income-tax.

Senior citizen

Q: I am going to complete 65 years on 17.12.2002 (Date of birth 17.2.1937). Kindly let me know if I will be allowed the benefit of Income-tax rebate of Rs 15,000 during the year 2001 and A.Y. 2001-2002 under Rule for a senior citizen u/s 88B.

— Charan Dass, Hoshiarpur

Ans: As you will complete 65 years of age in the month of February, 2002, you will be entitled to tax rebate only during the F.Y. 2001-2002 relevant to the assessment year 2002-2003. Even though you become a senior citizen in the month of February yet the tax rebate will be allowed.
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India turning young: PM

Hyderabad, December 2
Calling for a broad-based management education system that enriches the skills of professional workers, Prime Minister Atal Behari Vajpayee today said the knowledge-driven economy provided great opportunities for India to emerge as “the young nation”.

The Prime Minister was speaking after formally inaugurating the Rs 300 crore Indian School of Business near here, a collaborative venture by the country’s 50 top-notch corporates, affiliated to leading international business schools in US, UK.

Addressing the captains of Indian industry, Vajpayee spoke about the need to expand and improve educational infrastructure to tap the potential for knowledge workers all over the world.

“In 20 years from now, about 45 per cent of Indians will be in plus 20s. A large population of today’s advanced nations will be senior citizens. This means young Indians will be in great demand as knowledge workers,” he said.

Stating that management education should be seen as an all-encompassing need in nation-building, the Prime Minister advocated continuing management training for government officers to make them “result-oriented”, as management and administration are largely synonymous. PTI
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Reliance interested in DPC

Mumbai, December 2
Reliance Industries Ltd (RIL) appears to be interested in acquisition of embattled US energy major Enron’s Dabhol Power Company (DPC) through city-based power utility BSES Ltd, in which it is the largest stakeholder.

RIL’s interest in the project is apparent by the fact that a senior official of Reliance Power had accompanied BSES Chairman and Managing Director R. V. Shahi at the crucial three day meeting held in Singapore last month by the Indian financial institutions.

Though not directly involved in the bidding process, Reliance Power Vice-President J. P. Chalsani, along with Shahi, participated in the marathon discussions for the proposed “distress sale of the # 3 billion power project with DPC management itself”, senior FI sources told PTI here today. PTI
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BIZ BRIEFS

Inflation rises
New Delhi, December 2
A sharp rise in vegetables and fruits prices pushed up inflation by another 0.06 per cent to 2.53 per cent for the week ended November 17 as compared to 7.48 per cent in the same period of the previous year. The week also witnessed increase in the price of eggs on account of winter in the northern part of the country, even as prices dipped for many of the non-food articles. PTI

NABARD
Mumbai, December 2
The National Bank for Agriculture and Rural Development has sanctioned loans aggregating Rs 257.28 crore for projects in nine states including rural water supply scheme in Andhra Pradesh under the Rural Infrastructure Development Fund (RIDF) VII. PTI

SBI branch
Chandigarh, December 2
The State Bank of India, Dasuya branch, yesterday celebrated its 44th anniversary by organising medical check up camp. Mr S.K. Chadha, Chief Manager of the bank said the bank has disbursed a loan of Rs 2.16 crore to farmers for purchase of tractors and raising the output. he added that the interest rates on housing loan schemes are the lowest. TNS

Bajaj Auto
Mumbai, December 2
Bajaj auto has reported 14.2 per cent higher sales of two and three wheelers at 1,21,436 units in November 2001, as compared to 1,07,061 units sold in the corresponding month of the previous year. UNI

India Cements
Kolkata, December 2
India Cements Ltd reported a net loss of Rs 19.25 crore for the half year ended September 30, compared to a net profit of Rs 25.20 crore last year. UNI
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