Wednesday, October 13, 2010

Just running a petrol pump doesn't pay much

Just running a petrol pump doesn't pay much

N. Ramakrishnan

CHENNAI, Aug. 10

AMID allegations of favouritism in allotting petrol bunks and the continuing disruption in Parliament, talk to a cross-section of petrol dealers and all of them are unanimous in their view that business is difficult, competition intense and profit margins tight.

Then, why does anybody want to pay several lakh rupees to get a dealership? How will they recoup their investment? When these questions are posed to the dealers, all that they say with a wink is: "You should know."

What is, perhaps, left unsaid is that such dealers will have to dilute both the petrol and diesel to make huge profits.

A Chennai dealer, who has been in the business for a few decades, answers without any hesitation that it is quite common to adulterate petrol with naphtha and diesel with kerosene, because of which the profit margins are much higher.

According to the dealers, profit from selling petrol and diesel is hardly anything to talk of. The dealers get as commission one paise per rupee of the price of petrol or diesel. Which means that if the petrol is priced at Rs 31.64 a litre in Chennai, a dealer will get 31.6 paise per litre as commission, and with diesel priced at about Rs 20 a litre, 20 paise per litre sold.

Is this enough to meet their expenses and make a profit? Hardly, say the dealers. However, the profit for them comes mainly from the sale of lubricants and engine oils, and the car wash and service facilities that most petrol bunks have. The profit on a litre of engine oil, according to the dealers, can be as much as Rs 10-15.

There are three types of petrol and diesel dealerships — where the oil company owns the land and a dealer runs it; where the dealer owns the land as well as the bunk; and, finally a company-owned and company-operated bunk or COCO in oil company parlance.

Irrespective of the kind of ownership, the companies make all the investment in the facilities — the number of filling pumps and the underground tanks to store the fuel. The dealer has to bring in the working capital to buy petrol and diesel and make money by selling the fuel.

Over the last few years, the companies have been gradually converting the second category of dealerships — where the dealer owns the land and operates the filling station — into the first category, where the companies own the land and the dealer operates the facility alone. This, according to company sources, is to ensure greater control and also provide more amenities such as convenience stores and ATMs.

According to the officials, the companies' investment in a petrol bunk, excluding the cost of land, will be about Rs 1 crore. Normally, the dealers will be required to store up to two days' requirement of petrol and diesel. Some of the dealers point out that they have earned their reputation of selling quality fuel and of accurate measure over several years and for this reason alone, they would be patronised by motorists not living in the vicinity of the petrol bunks. However, with the companies certifying the quality of fuel in almost all the bunks, those who had earned a reputation are slowly losing business, according to one dealer.

His argument runs like this: "Earlier, even those not living near the bunk used to come here to fill up petrol because of our reputation. At that time, there was no certification from the company about the quality of petrol or diesel supplied by us. But now with most bunks being certified by the companies for the quality of fuel, the same motorists do not find the need to go out of their way and come to my bunk."

According to some dealers, the convenience stores that have been set up in most petrol bunks do not bring them any major income while they have to spend a lot on air-conditioning and posting a sales person. In bunks that have convenience stores and ATMs, the dealers have been told not to have vehicle wash and service facility. The dealers have taken this up with the companies as it is a loss of income for them. The dealers' expenditure includes paying salaries for the attendants in the bunks, their uniform and electricity charges.

http://www.thehindubusinessline.com/2002/08/11/stories/2002081101320100.htm

The ABC of Owning a petrol pump



How many people do you think bid for a petrol pump when an oil company puts one up for auction?

10? 20? 100? 1,000? Believe it or not, whenever an oil company issues an advertisement in a newspaper announcing the sale of a pump, an average of 5,000 people bid for it. Only one lucky person will get the allotment.

"This is what happens when supply is less and demand more," says Prakash Genani, former president, Petrol Dealers Association, Thane and Raigad district. "At present, there are sufficient petrol pumps in most cities in India. The real demand is in the small town and districts, where there is a real need. And this is why there is such a rush for pumps."

Those who are interested in applying for a pump have to fulfil a few simple criteria:

  • S/he has to be able to pay an application fee that ranges between Rs 500 to Rs 1,000.
  • His/Her annual family income must not exceed Rs 200,000.
  • None of his/her blood relations should own a petrol pump.
  • S/he should fall in the 18 to 60 age group.
  • S/he should file his income tax returns.
  • S/he should have a domicile certificate.
  • S/he will have to prove that s/he will be able to generate funds from the bank or from individual businessmen.
  • If s/he belongs to a scheduled caste or scheduled tribe, s/he should possess his/her caste certificate. War widows and ex-servicemen, too, must possess proper certificates proving their eligibility. The government also gives special allotments to people who are outstanding in their respective fields like art, music, literature, etc.

    Why, though, do people have this fascination for petrol pumps? It just so happens that this is one of the most profitable businesses one can run, as there are many different ways to make money.

    To begin with, the station owner gets a commission of 53 paise on every litre of petrol sold. On diesel, he earns a commission of 33 paise. The commission on different lubricants used for cars, motorcycles and trucks ranges from Rs 6 to Rs 7.

    Besides, all petrol pump stations run service stations as a side business and this brings in extra income. Some of them use the extra space to run stores, travel agencies or rent it out to automobile mechanics.

    On an average, a good petrol pump sells around 200 kilolitres (200,000 litres) of petrol and 100 kilolitres (100,000 litres) of diesel per month. Besides, it earns an average income of Rs 20,000 from the sale of lubricants and Rs 25,000 from the service stations. Thus, a net amount of Rs 184,000 goes straight into the owner's pocket.

    There are expenses too. If a pump employs 15 people at an average salary of Rs 2,500, the total salary comes to Rs 37,500. If four more people are employed at the service station, their salary will average out to another Rs 10,000. The accountant will charge Rs 8,000 and his assistant will earn Rs 3,000. The electricity bill comes up to another Rs 20,000.

    Even if the total expenditure averages out to Rs 76,000 a month, the net income on a petrol pump doing good business will average around Rs 100,000.

    The real income, however, comes from the sale of adulterated gasoline. "The petrol sold in India is always mixed with 20 per cent naphtha. Pure petrol is not available in most petrol pumps here. If we provide pure petrol, the margin of profit will be too low," says a dealer on condition of anonymity.

    Naphtha costs Rs 17 per litre, while petrol costs approximately Rs 33 per litre; so you can imagine the killing a pump can make by selling adulterated petrol. The only risk comes in the form of surprise checks by the petroleum ministry's anti-adulteration cell.

    Another way of making money is by fudging the meter. This means pump owners retain one per cent of the fuel due to you when you go to fill your car. For example, if you fill one litre of petrol in your car, the pump meter will show one litre but your car would have received only 990 millilitres.

    The kind of investment needed to own a petrol pump depends on the category under which it has been allotted.

    Under Category A, the land, pump, cabin and everything else comes from the oil company. The owner just has to run the show. Under Category B, the dealer has to buy the land; the rest of the equipment is provided by the company.

    If your pump falls in Category A, then you just have to run the show -- the company will provide you with everything you need. But if you belong to Category B, then you have to incur the cost of the furniture and buy the land. Your contribution could come up to a few lakhs, depending upon where you are buying the petrol pump and the kind of investment you want to put in. Every petrol pump also has to have a huge underground storage tank for petrol and diesel, where the quantity of fuel stored depends on your pump's output.

    And how are petrol pump owners selected?

    Every city/district has a three-member committee that decides on the allocation of petrol pumps. The committee consists of a retired high court or sessions court judge and two officers from any of the four oil companies -- Indian Oil Corporation, Hindustan Petroleum, Bharat Petroleum Corporation Limited and Indo-Burma Petroleum. The judge, who is the committee's most important member, can allot 200 points whereas the oil company officials have 100 points each. The candidate who gets the maximum points from the committee gets to own the gas station.

    This is why Petroleum Minister Ram Naik argues he had no role to play in deciding who should get a petrol pump. The Opposition, however, lays the blame solely at his door; they claim it is Naik's responsibility to appoint the judges and, therefore, he has to take moral responsibility and resign as most of the accused dealers who were allotted pumps are supporters of the Bharatiya Janata Party, of which Naik is a member.

    When the scam was exposed, Prime Minister Atal Bihari Vajpayee cancelled all petrol pump allotments issued after January 2000. But the old dealers, who got their pumps before the eighties, say it is nearly impossible for allotments to escape undue influence until such time as these allotments are made by the oil companies themselves.

    A dealer, speaking on condition of anonymity, explains, "How can retired judges have the maximum points to decide on the allotment of petrol pumps? They don't know how this business runs. It is best that the oil companies allot the pumps because they know their business and will ensure they get best returns from their dealers."

    "In fact, till the eighties, the pumps were allotted by the companies themselves. Then, the politicians realised they could make a killing if they got the right to do so. They brought the allotment under their jurisdiction, starting a controversy that has lasted over two decades."

  • http://www.rediff.com/news/2002/aug/09spec1.htm

    Monday, September 27, 2010

    An Eye for Business

    An Eye for Business

    He began by taking charge of his family-run a retails pharmacy chain and today runs 31 secondary and tertiary eye care hospitals across Tamil Nadu, Kerala, Karnataka and Andhra Pradesh


    Dr Arun Murugaiyah (38)
    Chairman, Vasan Healthcare Group

    Born in the town of Tiruchirappalli in 1969, Dr Arun did his MBBS from Annamalai University.

    Why an entrepreneur

    He wanted to pursue further specialisation and dreamt of building a multi-specialty hospital in the town. But he became an entrepreneur because of a twist in fate. The untimely death of his father compelled him take up his family business of one pharmacy retail outlet in the town of Trichy in the name of Vasan Medical Hall (VMH).

    "Within a few months of analysis, I found immense potential in retail drug sales. VMH had regular prescriptions from more than 200 loyal doctors since many years. Thus I decided to further nurture the potential in the trust capital of the business in hand," says he.

    The first move

    With small capital investments, Dr Arun started a slew of drug outlets in the city in strategic locations. He chose areas where large population of working middle class were based. "Every shop was lined up with a trained set of sales boys who will respond to every prescription across the counter and render quick service. No prescriptions were returned back and relationship-building strategies with referring doctors were devised," says he. His strategy clicked and initial success encouraged him to further expand his network of outlets to more densely-populated clusters in the town and also to bordering areas of the town.

    Over the years

    Soon, VMH attracted a footfall of more than 10,000 people a day in each outlet. Today, VMH is a chain of 27 outlets in Trichy and Madurai. Success of one concept gave rise to birth of another concept. During the process of developing the chain of pharmacy outlet, Dr Arun found that most of the referring doctors had large patient base in various specialties, practicing in attached clinic at their residences, after their work in Government hospitals or major hospitals in the town.

    "Most of these practitioners had ambitions of upgrading their facilities to meet the demand of patients, but had no resources or acumen to do so. I compiled a pool of 40 doctors from various specialties, and offered them a common working place with all state-of-the-art support equipment in daycare diagnosis," says he. Thus was born the first model of Vasan Medical Centre (VMC), which started its first centre in Trichy.

    The centre offers spacious consulting rooms with paramedical support staff, common equipment, minor theatres and all administrative support for managing the clinic. “Each doctor was given time slots in the centre, and their patients managed well with efficient patient care team. This model also gained quick success and accommodated more doctors from different areas," says he.

    In 2001, one of the leading group of eye care service provider in the south, approached Dr Arun for strategic alliance in eye care hospital in Trichy. "As ophthalmology was not an organised healthcare segment in south India during this time, I decided to tap the opportunity and started the first eye hospital in the town," says he. Thus was born Vasan Eye Care (VEC). As a pilot project, he invested only in secondary eye care facilities and later in tertiary care segment of eye care. Eventually, he expanded his services network to key markets in Tamil Nadu and Kerala. Acquisition of Dr Prem's Eye Clinic in Chennai was one of the significant acquisitions of VEC.

    Today, VEC has 31 secondary and tertiary eye care hospitals across the states of Tamil Nadu, Kerala, Karnataka and Andhra. He has more than 200 ophthalmologists and 2,000 paramedics working in his eye care enterprise.

    Mistakes made and lessons learnt

    He claims he made no serious business mistake, but had overcome various market challenges and backstabbing of key doctors and associates in the business process. "During the initial stage of expanding our network, I faced flak from aggressive competitors who tried to downplay my vision, and criticised me about my approach to penetrate and network which was totally innovative and revolutionary," says he.

    Fear and apprehension

    "I had no apprehensions about the success of my business model as there was a naked lacunae and it was all about who taps the opportunity first," says he.

    Overcoming roadblocks

    Earlier challenges lay in roping in experienced doctors to join his hospitals. "I had to do beyond the limited retention exercises and also offer attractive perks to make doctors join my upcoming hospitals. Today, we are at luxury of choosing the best talent among hundreds of applications for employment," says he.

    Any degree in management?

    No. "But I am a voracious reader and keep myself updated of all business developments across the world. I have travelled extensively during the initial stages to understand the successful business models. Before venturing into any new business model, I personally inspect a similar model, do my own research and analysis, and weigh all pros and cons,” says he.

    Tips for entrepreneuship

    "Healthcare is a passion more than a business. The secret of success in any healthcare business is passion to evolve it with great involvement," he says passionately.

    An entrepreneur that he admires in healthcare

    “Dr Prathap C Reddy, who has passion and carries the fire among the entire team down the line. All successful eye care models today evolve around passion of individual entrepreneurs like G Venkatasamy who built Aravind Eye Care System, GN Rao, who built LV Prasad Eye Care, and Dr SS Badrinath who built temple of vision, Sankara Nethralya,” says he.

    The road ahead

    Dr Arun has set his sails in a voyage towards 50 eye hospitals by this year and 100 eye hospitals by the year 2010.

    Tuesday, April 20, 2010

    Looters in Loafers

    Looters in Loafers

    Last October, I saw a cartoon by Mike Peters in which a teacher asks a student to create a sentence that uses the verb “sacks,” as in looting and pillaging. The student replies, “Goldman Sachs.”

    Sure enough, last week the Securities and Exchange Commission accused the Gucci-loafer guys at Goldman of engaging in what amounts to white-collar looting.

    I’m using the term looting in the sense defined by the economists George Akerlof and Paul Romer in a 1993 paper titled “Looting: The Economic Underworld of Bankruptcy for Profit.” That paper, written in the aftermath of the savings-and-loan crisis of the Reagan years, argued that many of the losses in that crisis were the result of deliberate fraud.

    Was the same true of the current financial crisis?

    Most discussion of the role of fraud in the crisis has focused on two forms of deception: predatory lending and misrepresentation of risks. Clearly, some borrowers were lured into taking out complex, expensive loans they didn’t understand — a process facilitated by Bush-era federal regulators, who both failed to curb abusive lending and prevented states from taking action on their own. And for the most part, subprime lenders didn’t hold on to the loans they made. Instead, they sold off the loans to investors, in some cases surely knowing that the potential for future losses was greater than the people buying those loans (or securities backed by the loans) realized.

    What we’re now seeing are accusations of a third form of fraud.

    We’ve known for some time that Goldman Sachs and other firms marketed mortgage-backed securities even as they sought to make profits by betting that such securities would plunge in value. This practice, however, while arguably reprehensible, wasn’t illegal. But now the S.E.C. is charging that Goldman created and marketed securities that were deliberately designed to fail, so that an important client could make money off that failure. That’s what I would call looting.

    And Goldman isn’t the only financial firm accused of doing this. According to the Pulitzer-winning investigative journalism Web site ProPublica, several banks helped market designed-to-fail investments on behalf of the hedge fund Magnetar, which was betting on that failure.

    So what role did fraud play in the financial crisis? Neither predatory lending nor the selling of mortgages on false pretenses caused the crisis. But they surely made it worse, both by helping to inflate the housing bubble and by creating a pool of assets guaranteed to turn into toxic waste once the bubble burst.

    As for the alleged creation of investments designed to fail, these may have magnified losses at the banks that were on the losing side of these deals, deepening the banking crisis that turned the burst housing bubble into an economy-wide catastrophe.

    The obvious question is whether financial reform of the kind now being contemplated would have prevented some or all of the fraud that now seems to have flourished over the past decade. And the answer is yes.

    For one thing, an independent consumer protection bureau could have helped limit predatory lending. Another provision in the proposed Senate bill, requiring that lenders retain 5 percent of the value of loans they make, would have limited the practice of making bad loans and quickly selling them off to unwary investors.

    It’s less clear whether proposals for derivatives reform — which mainly involve requiring that financial instruments like credit default swaps be traded openly and transparently, like ordinary stocks and bonds — would have prevented the alleged abuses by Goldman (although they probably would have prevented the insurer A.I.G. from running wild and requiring a federal bailout). What we can say is that the final draft of financial reform had better include language that would prevent this kind of looting — in particular, it should block the creation of “synthetic C.D.O.’s,” cocktails of credit default swaps that let investors take big bets on assets without actually owning them.

    The main moral you should draw from the charges against Goldman, though, doesn’t involve the fine print of reform; it involves the urgent need to change Wall Street. Listening to financial-industry lobbyists and the Republican politicians who have been huddling with them, you’d think that everything will be fine as long as the federal government promises not to do any more bailouts. But that’s totally wrong — and not just because no such promise would be credible.

    For the fact is that much of the financial industry has become a racket — a game in which a handful of people are lavishly paid to mislead and exploit consumers and investors. And if we don’t lower the boom on these practices, the racket will just go on.

    Wednesday, March 31, 2010

    Carpet Area Vs Built Up Area Vs Super Built Up Area By Nisheeth Ranjan

    Carpet Area Vs Built Up Area Vs Super Built Up Area

    The terms built up area, super built up area, salable area and carpet area pop up again and again for an Indian real estate buyer. The apartment that is sold as a spacious 1500 sq ft apartment, is actually not 1500 sq ft if you count its actual covered area, or carpet area.

    Definitions -

    1. Carpet area - The actual area you use. The area on which 'you can put a carpet'.

    2. Built up area - Carpet area + area of walls and ducts. Around 10% more than the carpet area. A terrace is considered as half the actual area for calculating built up area. Some projects charge dry terrace same as internal rooms.

    3. Super built up / Salable area - Built up area + markup for common spaces like lifts and stairs. Usually 25% more than the built up area.

    Let us take an example.

    This is a small apartment whose salable area, or super built up area is 892 sq ft. Let us calculate its carpet area by summing up all its rooms -

    Room           Dimensions (ft & inch) Carpet area in sq. ft.

    Living Room         10′ x 15′-9″          157.5 

    Dining Room         7′ x 7′-8″                53.6 

    Bedroom 1         11′-9″ x 10′-9″         126.3 

    Bedroom 2         11′-9″ x 10              117.5 

    Toilet 1         8′-6″ x 5                  42.5 

    Toilet 2         8′-4″ x 4′-3″             35.4 

    Terrace                 10′ x 5′-9″                57.5 

    Kitchen                 11′ x 8′-6″             93.5 

    Here is the details of one of the apartments at Kumar Periwinkle in Kharadi we are talking about.

    Now terraces are generally considered by halving their actual area. So, area considered of the terrace is 57.5/2 sq ft = 28.75 sq ft.

    So, the total carpet area for the rooms of the flat comes to be approximately 655 sq ft. Now there is a passage area at the center of the flat, which looks approximately 11 feet by 5 feet, which adds 55 sq ft more to the area.

    So, approximate carpet area of the flat = 710 sq ft.

    Now, the salable area as given on the website is 892 sq ft. This is the area which is billed to you by multiplying it with the square foot rate.

    This difference is what super built up area is all about. As far as I have seen, a thumb rule is to take 1.25 as the multiplying factor to calculate super built up area (i.e. salable area).

    So, if we multiply by this factor, 710 * 1.25 = 887.5 sq ft is approximately the answer we are supposed to arrive at.

    But this rule of 25% is no written rule, and this multiplier can vary. Ideally, this multiplier should be more for the schemes where more space is given to amenities and common areas. This area is supposed to include the common amenities that are built but are not directly charged to the customer. But there are no concrete formulas for this. The agreement that you will sign with the builder, should have all the details like carpet area in it. But you will probably see the agreement in detail only after you decide to buy your home there.

    So are you getting cheated when you actually get a 700 sq ft apartment when you thought you got 900 sq ft? Not really... The key is to ask for the carpet area of the apartment you are buying, and verify it by doing a calculation as given above, and also verify the dimensions actually on the ground if possible. As long as we have open market economy, you will always have choices. So, if you find that a project has a multiplying factor of 25% for super built up area and another has 30%, the simplest thing you can do, is get the carpet area of the actual rooms and find out the per sq ft rate based on carpet area, to compare the two projects.

    Apart from this, there are also several extra bills like electricity backup charges, parking charges, maintenance charges for amenities, society formation charges so on and so forth. So, you need to consider and compare all of these charges before thinking of choosing the right project to buy a property. Give a hard thought to how many of the amenities you are actually going to use, and how much you are getting charged for them. Will it be simply better to buy into a no-frills project and join a gymkhana club rather than paying maintenance charges for the swimming pool you are not going to use?

    Simply create an excel sheet and put all the parameters of the property in it, like carpet area, parking charges etc. Use that sheet as your basis of taking decision and not the glossy marketing brochures they give you!

    Zamanzar.com is currently ranked within the TOP 10 real estate portals in India according to Alexa traffic rank. The company was started in 2007 by Nisheeth Ranjan, a graduate of Cornell University and Stanford University, after having worked in Silicon Valley, California for more than 10 years. Zamanzar.com provides an end to end solution for buying/renting/selling residential or commercial real estate across India. The real estate portal has more than 200,000 property listings and offers online and offline services for buyers, renters, owners, agents, and builders. These services include online marketing, property tours, property appraisals, title checks, financing, negotiation, legal paperwork, property registration etc.

    Article Source: http://EzineArticles.com/?expert=Nisheeth_Ranjan

    Friday, March 26, 2010

    The Troubles - Americs's imminent demis

    The Gang That Couldn't Shoot Straight

    Friday, July 18, 2008

    Mandela: His 8 Lessons of Leadership

    Mandela: His 8 Lessons of Leadership

    Nelson Mandela has always felt most at ease around children, and in some ways his greatest deprivation was that he spent 27 years without hearing a baby cry or holding a child's hand. Last month, when I visited Mandela in Johannesburg — a frailer, foggier Mandela than the one I used to know — his first instinct was to spread his arms to my two boys. Within seconds they were hugging the friendly old man who asked them what sports they liked to play and what they'd had for breakfast. While we talked, he held my son Gabriel, whose complicated middle name is Rolihlahla, Nelson Mandela's real first name. He told Gabriel the story of that name, how in Xhosa it translates as "pulling down the branch of a tree" but that its real meaning is "troublemaker."

    As he celebrates his 90th birthday next week, Nelson Mandela has made enough trouble for several lifetimes. He liberated a country from a system of violent prejudice and helped unite white and black, oppressor and oppressed, in a way that had never been done before. In the 1990s I worked with Mandela for almost two years on his autobiography, Long Walk to Freedom. After all that time spent in his company, I felt a terrible sense of withdrawal when the book was done; it was like the sun going out of one's life. We have seen each other occasionally over the years, but I wanted to make what might be a final visit and have my sons meet him one more time.

    I also wanted to talk to him about leadership. Mandela is the closest thing the world has to a secular saint, but he would be the first to admit that he is something far more pedestrian: a politician. He overthrew apartheid and created a nonracial democratic South Africa by knowing precisely when and how to transition between his roles as warrior, martyr, diplomat and statesman. Uncomfortable with abstract philosophical concepts, he would often say to me that an issue "was not a question of principle; it was a question of tactics." He is a master tactician.

    Mandela is no longer comfortable with inquiries or favors. He's fearful that he may not be able to summon what people expect when they visit a living deity, and vain enough to care that they not think him diminished. But the world has never needed Mandela's gifts — as a tactician, as an activist and, yes, as a politician — more, as he showed again in London on June 25, when he rose to condemn the savagery of Zimbabwe's Robert Mugabe. As we enter the main stretch of a historic presidential campaign in America, there is much that he can teach the two candidates. I've always thought of what you are about to read as Madiba's Rules (Madiba, his clan name, is what everyone close to him calls him), and they are cobbled together from our conversations old and new and from observing him up close and from afar. They are mostly practical. Many of them stem directly from his personal experience. All of them are calibrated to cause the best kind of trouble: the trouble that forces us to ask how we can make the world a better place.

    No. 1
    Courage is not the absence of fear — it's inspiring others to move beyond it
    In 1994, during the presidential-election campaign, Mandela got on a tiny propeller plane to fly down to the killing fields of Natal and give a speech to his Zulu supporters. I agreed to meet him at the airport, where we would continue our work after his speech. When the plane was 20 minutes from landing, one of its engines failed. Some on the plane began to panic. The only thing that calmed them was looking at Mandela, who quietly read his newspaper as if he were a commuter on his morning train to the office. The airport prepared for an emergency landing, and the pilot managed to land the plane safely. When Mandela and I got in the backseat of his bulletproof BMW that would take us to the rally, he turned to me and said, "Man, I was terrified up there!"

    Mandela was often afraid during his time underground, during the Rivonia trial that led to his imprisonment, during his time on Robben Island. "Of course I was afraid!" he would tell me later. It would have been irrational, he suggested, not to be. "I can't pretend that I'm brave and that I can beat the whole world." But as a leader, you cannot let people know. "You must put up a front."

    And that's precisely what he learned to do: pretend and, through the act of appearing fearless, inspire others. It was a pantomime Mandela perfected on Robben Island, where there was much to fear. Prisoners who were with him said watching Mandela walk across the courtyard, upright and proud, was enough to keep them going for days. He knew that he was a model for others, and that gave him the strength to triumph over his own fear.

    No. 2
    Lead from the front — but don't leave your base behind
    Mandela is cagey. in 1985 he was operated on for an enlarged prostate. When he was returned to prison, he was separated from his colleagues and friends for the first time in 21 years. They protested. But as his longtime friend Ahmed Kathrada recalls, he said to them, "Wait a minute, chaps. Some good may come of this."

    The good that came of it was that Mandela on his own launched negotiations with the apartheid government. This was anathema to the African National Congress (ANC). After decades of saying "prisoners cannot negotiate" and after advocating an armed struggle that would bring the government to its knees, he decided that the time was right to begin to talk to his oppressors.

    When he initiated his negotiations with the government in 1985, there were many who thought he had lost it. "We thought he was selling out," says Cyril Ramaphosa, then the powerful and fiery leader of the National Union of Mineworkers. "I went to see him to tell him, What are you doing? It was an unbelievable initiative. He took a massive risk."

    Mandela launched a campaign to persuade the ANC that his was the correct course. His reputation was on the line. He went to each of his comrades in prison, Kathrada remembers, and explained what he was doing. Slowly and deliberately, he brought them along. "You take your support base along with you," says Ramaphosa, who was secretary-general of the ANC and is now a business mogul. "Once you arrive at the beachhead, then you allow the people to move on. He's not a bubble-gum leader — chew it now and throw it away."

    For Mandela, refusing to negotiate was about tactics, not principles. Throughout his life, he has always made that distinction. His unwavering principle — the overthrow of apartheid and the achievement of one man, one vote — was immutable, but almost anything that helped him get to that goal he regarded as a tactic. He is the most pragmatic of idealists.

    "He's a historical man," says Ramaphosa. "He was thinking way ahead of us. He has posterity in mind: How will they view what we've done?" Prison gave him the ability to take the long view. It had to; there was no other view possible. He was thinking in terms of not days and weeks but decades. He knew history was on his side, that the result was inevitable; it was just a question of how soon and how it would be achieved. "Things will be better in the long run," he sometimes said. He always played for the long run.

    No. 3
    Lead from the back — and let others believe they are in front
    Mandela loved to reminisce about his boyhood and his lazy afternoons herding cattle. "You know," he would say, "you can only lead them from behind." He would then raise his eyebrows to make sure I got the analogy.

    As a boy, Mandela was greatly influenced by Jongintaba, the tribal king who raised him. When Jongintaba had meetings of his court, the men gathered in a circle, and only after all had spoken did the king begin to speak. The chief's job, Mandela said, was not to tell people what to do but to form a consensus. "Don't enter the debate too early," he used to say.

    During the time I worked with Mandela, he often called meetings of his kitchen cabinet at his home in Houghton, a lovely old suburb of Johannesburg. He would gather half a dozen men, Ramaphosa, Thabo Mbeki (who is now the South African President) and others around the dining-room table or sometimes in a circle in his driveway. Some of his colleagues would shout at him — to move faster, to be more radical — and Mandela would simply listen. When he finally did speak at those meetings, he slowly and methodically summarized everyone's points of view and then unfurled his own thoughts, subtly steering the decision in the direction he wanted without imposing it. The trick of leadership is allowing yourself to be led too. "It is wise," he said, "to persuade people to do things and make them think it was their own idea."

    No. 4
    Know your enemy — and learn about his favorite sport
    As far back as the 1960s, Mandela began studying Afrikaans, the language of the white South Africans who created apartheid. His comrades in the ANC teased him about it, but he wanted to understand the Afrikaner's worldview; he knew that one day he would be fighting them or negotiating with them, and either way, his destiny was tied to theirs.

    This was strategic in two senses: by speaking his opponents' language, he might understand their strengths and weaknesses and formulate tactics accordingly. But he would also be ingratiating himself with his enemy. Everyone from ordinary jailers to P.W. Botha was impressed by Mandela's willingness to speak Afrikaans and his knowledge of Afrikaner history. He even brushed up on his knowledge of rugby, the Afrikaners' beloved sport, so he would be able to compare notes on teams and players.

    Mandela understood that blacks and Afrikaners had something fundamental in common: Afrikaners believed themselves to be Africans as deeply as blacks did. He knew, too, that Afrikaners had been the victims of prejudice themselves: the British government and the white English settlers looked down on them. Afrikaners suffered from a cultural inferiority complex almost as much as blacks did.

    Mandela was a lawyer, and in prison he helped the warders with their legal problems. They were far less educated and worldly than he, and it was extraordinary to them that a black man was willing and able to help them. These were "the most ruthless and brutal of the apartheid regime's characters," says Allister Sparks, the great South African historian, and he "realized that even the worst and crudest could be negotiated with."

    No. 5
    Keep your friends close — and your rivals even closer
    Many of the guests Mandela invited to the house he built in Qunu were people whom, he intimated to me, he did not wholly trust. He had them to dinner; he called to consult with them; he flattered them and gave them gifts. Mandela is a man of invincible charm — and he has often used that charm to even greater effect on his rivals than on his allies.

    On Robben Island, Mandela would always include in his brain trust men he neither liked nor relied on. One person he became close to was Chris Hani, the fiery chief of staff of the ANC's military wing. There were some who thought Hani was conspiring against Mandela, but Mandela cozied up to him. "It wasn't just Hani," says Ramaphosa. "It was also the big industrialists, the mining families, the opposition. He would pick up the phone and call them on their birthdays. He would go to family funerals. He saw it as an opportunity." When Mandela emerged from prison, he famously included his jailers among his friends and put leaders who had kept him in prison in his first Cabinet. Yet I well knew that he despised some of these men.

    There were times he washed his hands of people — and times when, like so many people of great charm, he allowed himself to be charmed. Mandela initially developed a quick rapport with South African President F.W. de Klerk, which is why he later felt so betrayed when De Klerk attacked him in public.

    Mandela believed that embracing his rivals was a way of controlling them: they were more dangerous on their own than within his circle of influence. He cherished loyalty, but he was never obsessed by it. After all, he used to say, "people act in their own interest." It was simply a fact of human nature, not a flaw or a defect. The flip side of being an optimist — and he is one — is trusting people too much. But Mandela recognized that the way to deal with those he didn't trust was to neutralize them with charm.

    No. 6
    Appearances matter — and remember to smile
    When Mandela was a poor law student in Johannesburg wearing his one threadbare suit, he was taken to see Walter Sisulu. Sisulu was a real estate agent and a young leader of the ANC. Mandela saw a sophisticated and successful black man whom he could emulate. Sisulu saw the future.

    Sisulu once told me that his great quest in the 1950s was to turn the ANC into a mass movement; and then one day, he recalled with a smile, "a mass leader walked into my office." Mandela was tall and handsome, an amateur boxer who carried himself with the regal air of a chief's son. And he had a smile that was like the sun coming out on a cloudy day.

    We sometimes forget the historical correlation between leadership and physicality. George Washington was the tallest and probably the strongest man in every room he entered. Size and strength have more to do with DNA than with leadership manuals, but Mandela understood how his appearance could advance his cause. As leader of the ANC's underground military wing, he insisted that he be photographed in the proper fatigues and with a beard, and throughout his career he has been concerned about dressing appropriately for his position. George Bizos, his lawyer, remembers that he first met Mandela at an Indian tailor's shop in the 1950s and that Mandela was the first black South African he had ever seen being fitted for a suit. Now Mandela's uniform is a series of exuberant-print shirts that declare him the joyous grandfather of modern Africa.

    When Mandela was running for the presidency in 1994, he knew that symbols mattered as much as substance. He was never a great public speaker, and people often tuned out what he was saying after the first few minutes. But it was the iconography that people understood. When he was on a platform, he would always do the toyi-toyi, the township dance that was an emblem of the struggle. But more important was that dazzling, beatific, all-inclusive smile. For white South Africans, the smile symbolized Mandela's lack of bitterness and suggested that he was sympathetic to them. To black voters, it said, I am the happy warrior, and we will triumph. The ubiquitous ANC election poster was simply his smiling face. "The smile," says Ramaphosa, "was the message."

    After he emerged from prison, people would say, over and over, It is amazing that he is not bitter. There are a thousand things Nelson Mandela was bitter about, but he knew that more than anything else, he had to project the exact opposite emotion. He always said, "Forget the past" — but I knew he never did.

    No. 7
    Nothing is black or white
    When we began our series of interviews, I would often ask Mandela questions like this one: When you decided to suspend the armed struggle, was it because you realized you did not have the strength to overthrow the government or because you knew you could win over international opinion by choosing nonviolence? He would then give me a curious glance and say, "Why not both?"

    I did start asking smarter questions, but the message was clear: Life is never either/or. Decisions are complex, and there are always competing factors. To look for simple explanations is the bias of the human brain, but it doesn't correspond to reality. Nothing is ever as straightforward as it appears.

    Mandela is comfortable with contradiction. As a politician, he was a pragmatist who saw the world as infinitely nuanced. Much of this, I believe, came from living as a black man under an apartheid system that offered a daily regimen of excruciating and debilitating moral choices: Do I defer to the white boss to get the job I want and avoid a punishment? Do I carry my pass?

    As a statesman, Mandela was uncommonly loyal to Muammar Gaddafi and Fidel Castro. They had helped the ANC when the U.S. still branded Mandela as a terrorist. When I asked him about Gaddafi and Castro, he suggested that Americans tend to see things in black and white, and he would upbraid me for my lack of nuance. Every problem has many causes. While he was indisputably and clearly against apartheid, the causes of apartheid were complex. They were historical, sociological and psychological. Mandela's calculus was always, What is the end that I seek, and what is the most practical way to get there?

    No. 8
    Quitting is leading too
    In 1993, Mandela asked me if I knew of any countries where the minimum voting age was under 18. I did some research and presented him with a rather undistinguished list: Indonesia, Cuba, Nicaragua, North Korea and Iran. He nodded and uttered his highest praise: "Very good, very good." Two weeks later, Mandela went on South African television and proposed that the voting age be lowered to 14. "He tried to sell us the idea," recalls Ramaphosa, "but he was the only [supporter]. And he had to face the reality that it would not win the day. He accepted it with great humility. He doesn't sulk. That was also a lesson in leadership."

    Knowing how to abandon a failed idea, task or relationship is often the most difficult kind of decision a leader has to make. In many ways, Mandela's greatest legacy as President of South Africa is the way he chose to leave it. When he was elected in 1994, Mandela probably could have pressed to be President for life — and there were many who felt that in return for his years in prison, that was the least South Africa could do.

    In the history of Africa, there have been only a handful of democratically elected leaders who willingly stood down from office. Mandela was determined to set a precedent for all who followed him — not only in South Africa but across the rest of the continent. He would be the anti-Mugabe, the man who gave birth to his country and refused to hold it hostage. "His job was to set the course," says Ramaphosa, "not to steer the ship." He knows that leaders lead as much by what they choose not to do as what they do.

    Ultimately, the key to understanding Mandela is those 27 years in prison. The man who walked onto Robben Island in 1964 was emotional, headstrong, easily stung. The man who emerged was balanced and disciplined. He is not and never has been introspective. I often asked him how the man who emerged from prison differed from the willful young man who had entered it. He hated this question. Finally, in exasperation one day, he said, "I came out mature." There is nothing so rare — or so valuable — as a mature man. Happy birthday, Madiba.

    http://www.time.com/time/world/article/0,8599,1821467,00.html

    Thursday, August 02, 2007

    Will and settlement of property

    C. H. Gopinatha Rao

    There is a large gap in the amount to be spent after death compared to settling when one is alive. It is high time the Law Commission took initiatives to set right this discrimination.

    A WILL is the disposition of the assets made by a person during his lifetime intended to take effect after death. When a person dies without making a will, he is said to have died intestate, that is, the property is inherited by the heirs according to the law of succession. In this case the heirs need to obtain a legal heir certificate.

    When a person dies after making a will, it can be enforced only after a probate is issued. A probate is identified as the copy of the will certified under the seal of the court of competent jurisdiction. No right as executor or legatee can be established unless a court of competent jurisdiction in India has granted probate of the will under which the right is claimed or has been granted. Probate can be granted only to the executor appointed by the will.

    A petition for the probate is to be filed in the court concerned along with the will. The petitioner should remit court fees of value equal to specified percentage (3 per cent in Tamil Nadu) of the value of assets to be inherited. The assets may include immovable properties for which to arrive at the stamp duty the value should be worked out.

    In Gorhandas Hargoindas vs Municipal Commissioner Ahmedabad (1964) 66 Nm LR 68, 78 AIR 1963 Sc 1742 1747, the Court stated that "... annual value or rateable value is arrived at by one of the three methods:

  • Annual rent fetched by land or building where it is actual let,

  • Where it is not let, rent based on hypothetical tenancy, particularly in the case of buildings, and

  • Where either of these two methods is not available, by valuation based on capital value... "

    It has been held by the Bombay High Court, in a petition filed by Madhusudhan Dwarkda Vora vs Superintendent of Stamps that the wealth tax rules provide a method for assessing the value of unutilised surplus land where the difference between the unbuilt area and specified area is less than 20 per cent of the aggregate area. The same method must be applied for the grant of probate.

    Relevant extract of Rule 3 of Wealth Tax Act

    Where Rule 3 is applicable the value of the immovable property being a building or land appurtenant thereto or part thereof shall be amount arrived by multiplying the net maintainable rent by 12.5.

    The net maintainable rent in relation to an immovable property shall be the gross maintainable rent as reduced by

  • The amount of taxes levied by any local authority in respect of the property, and

  • A sum equivalent to 15 per cent of the gross maintainable rent.

    Gross maintainable rent

  • Where the property is let the amount received or receivable by the owner as annual rent or the annual value assessed by the local authority in whose area the property is situated for the purpose of levy of the property tax or any other tax on the basis of such assessment whichever is higher.

  • Where the property is not let the annual rent assessed by the local authority in whose area the property is situated for the purpose of levy of property tax or if there is no such assessment or the property is situated outside the area of any local authority, the amount the owner can reasonably expect to receive as annual rent had such property been let.

  • Where the owner has accepted any amount as deposit (not being advance payment towards rent for three months or less) by the amount calculated at the rate of 15 per cent per annum on the amount of deposit outstanding from month to month for number of months (excluding part of a month) during which such deposit was held by the owner in the previous year and if the owner is liable to pay interest on such deposit the increase made in this clause shall be limited to the sum by which the amount calculated as afore said exceeds the interest actually paid.

    Rent received or receivable shall include all payments for the use of the property, by whatever name called, the value of all benefits or prerequisites whether convertible as money or not obtained from the tenant or occupier of the property and any sum paid by a tenant or occupier of the property in respect of any obligation which but for such payment would have been payable by the owner.

    Example for the adjustment to value arrived at under Rule 3 for unbuilt area of plot of land:

    Mr X was the owner of a property at Chennai with an extent of 7,200 sq ft of land and a building with 3,000 sq ft on the ground floor and 1,500 square feet in the first floor. X passed away in 2002 leaving a will and the Registrar valued the property in 2003 at Rs 40 lakh as per their guidelines.

    Valuation of the property as per Rule 3 of the Wealth Tax Act

    Extent of land: 7,200 sq ft

    Extent of building in the ground floor: 3,000 sq ft

    Extent of unbuilt area 7,200 sq ft - 3,000 sq ft = 4,200sq ft.

    Percentage of unbuilt area = 4,200sq ft/7,200sq ft*100 = 58.33 per cent

    Specified area for Chennai = 60 per cent.

    Percentage of unbuilt area is less than the specified area. Hence Rule 3 is applicable without adjustment.

    The property is owner occupied throughout.

    Annual value filed by the Corporation of Chennai: Rs 16,380

    Gross annual income: Rs 16,380.91 - 18,000

    Deduct property tax and other taxes: (-) Rs 3,000

    15 per cent of gross annual income: Rs 2,700

    Net annual income = Rs 18,000 - Rs 5,700 = Rs 12,300

    Value of the property: Rs 12,300*12.5 = Rs 1,53,750

    The value of the property is only Rs 1,53,750 when worked out by application of Rule 3 of the Wealth Tax Act against Rs 40 lakh assessed by the Registrar.

    According to the Tamil Nadu Court Fees and Suits Valuation Act the fee chargeable for the grant of probate or letters of administration shall comprise a fee at the rate of 3 per cent on value if it exceeds Rs 5,000.

    When the application is made within one year of the death of a person, the market value of the estate on such a date is to be worked out for payment of fees.

    A circular released on January 11, 2002 by the Inspector-General of Registration, Government of Tamil Nadu (Circular No. 45794) mentions, "The stamp duty payable for the instrument of settlement in favour of a member or members of a family is based on the value as set forth in the settlement and not the market value." Incidentally, gift tax has also been abolished under the Income-Tax Act.

    This means that a man seeking settlement in his lifetime ends up spending far less on stamp duty to be paid than when he is dead. The court fees payable at the rates prescribed under the Court Fees Act may vary in the other States.

    Besides this, immovable property in territories other than West Bengal, Mumbai and Chennai require no probate for wills made by Hindus.

    A living person making a settlement in favour of his family members has to pay a stamp duty of 5 per cent (4 per cent stamp duty and 1 per cent registration) for the property valued at his discretion and not the market value. If the property changes hands after his death through probate the court fee paid is 3 per cent of its market value of the property.

    For example, if the market value of the property is Rs 50 lakh, he can settle at 5 per cent of Rs 1 lakh or even less, which will cost only Rs 5,000. In the latter case the amount to be spent is Rs 1.5 lakh. Thus, there is a large gap in the amount to be spent after death compared to settling when one is alive. It is high time the Law Commission took initiatives to set right this discrimination by recommending to the government, an amendment to the Act.

    (The author is former National President, Institution of Valuers.)

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