Citizens' Issues
Inordinate delays at Pune Passport office; RTI applications rejected

Has the public-private –partnership between Tata Consultancy Services and the Passport Office become a joke in Pune, as utter chaos and harassment of passport applicants prevail. To add to the fury, the Passport Office is also rejecting RTI applications on flimsy grounds

If you are an upright citizen who would not use the service of agents to get your passport, you would be in a dock, particularly if it happens to be the Passport Office at Pune. Allegedly, a deep nexus between the officials and agents is resulting in harassment to citizens.
 

Young Sachin Bhasme is an architect by profession and has consciously not used services of any agent even for his driving license. However, in the case of his passport, when he applied with the same principles of lawfulness, it has backfired. Since applying for a passport on 20 September 2012, he has been running from the Passport Office to the Tata Consultancy Services offices to police stations. He has even made attempts to file RTI applications but all in vain.
 

His story goes like this: After applying online for his passport fee receipt no PN1F12301732862) and going through his appointment at the Tata Consultancy Services (TCS) offices (which is a front end operations partner with the Ministry of External Affairs under the public-private-partnership (PPP)) for verification of his documents. He got an e-acknowledgement letter from Pune’s Regional Passport Office on the same day, stating “submitted successfully; Application status: Pre-Police Verification Mode”.
 

After the requisite 45 days, he did not receive his passport. He waited patiently and visited the Passport Office on 15 December 2012. The Officials told him that police verification is pending. He went to the relevant police station but his application had not reached. Says Bhasme, “I sifted through all the passport applications that were received by the police station, but mine was missing.’’ He was then asked to go to the Passport Division at the Pune Police Commissionerate headquarters. There too his application had not arrived.
 

Read Are information commissioners killing the RTI Act? by Vinita Deshmukh

Says Bhasme, “I went back to the Passport Office in the first week of January with my RTI application to know the status of my passport. One officer who named herself as Seeta asked me not to invoke RTI and that, I should wait for 10 more days, assuring me that I would receive my passport.’’
 

Predictably, there was no news. So Bhasme again visited the Passport Office with his RTI application on 16 January 2013.  He wrote his application and under Section 6 of the RTI Act demanding “the daily progress made on my application so far; when did my application reach which officer, for how long; according to information given in your official website (http://www.passportindia.gov.in/AppOnlineProject/online/faqWhatHasChanged) my passport should have been made in 30 to 45 days as per old system and three days as per current system. However, it is more than 3 months and 28 days now. Please give names and designations of officials who were supposed to take action on my application and who have not done so; what action would be taken against these officials for not doing their work and for causing harassment to the public? By when would I get my passport now.”
 

However, his RTI application was rejected by the Passport Officer saying that they do not accept the fee of Rs10 in cash and have asked him to give a DD. This is in gross violation of the application fee norms put up on the Ministry of External Affairs website ’’http://www.passportindia.gov.in/AppOnlineProject/pdf/RTI.pdf, which clearly states that fees can be given in cash – 2. Application Fee: The application for obtaining information under  sub-section (1) of section 6 of RTI Act, 2005, must be accompanied by prescribed application fee drawn in favour of Accounts Officer, Ministry of External Affairs payable at New Delhi, or the Regional Passport Officer, payable at the place where the application is being submitted. At present the application fee, which is subject to change from time to time, is as under:-Application fee: Rs. 10/- (Rupees ten only). Mode of payment: By cash against proper receipt or by demand draft/ banker's cheque / Indian Postal Order.”
 

Read here how noted RTI activists Shailesh Gandhi and Aruna Roy filed Intervention Petition in the Supreme Court
 

Says a harassed Bhasme, “The TCS office does not even entertain your complaints. They say that their responsibility is over once they forward your application to the Passport Office. Any queries regarding the status or reasons of delay of your passport are not answered and I was told to sort it out with the Passport office.’’ 
 

This is in complete contrast to the press release dated October 13, 2008 issued by TCS when it entered into PPP in 2008 (http://www.tcs.com/news_events/press_releases/Pages/GOI-awards-Passport-Automation-to-TCS.aspx ). Tanmoy Chakrabarty, Vice President, Global Government Business Group, TCS has quoted as committing: “A call center would be established to help the applicants with information regarding passport procedures and the status of submitted requests. Grievances would be tracked and closed. Passport Facilitation Centers (PFCs) will be the primary hubs supporting all activities including biometric capture, photograph, payment and verification and issue of passports in the presence of applicants for most cases… Complete tracking of the process would be possible in the system. Police nodal offices will be facilitated by TCS personnel and it will be possible to download passport forms there directly, thus eliminating any logistic delay.’’
 

The press release tom-tommed this PPP as “India's Largest Mission Critical E-governance Project of over Rs10,000 million; Passports to be delivered after three working days post police-verification.’’ What is the use if the TCS is merely acting as a courier service to the Passport office?
 

Read about an RTI workshop organized by Moneylife Foundation on using specific orders of the CIC to file an effective RTI applications conducted by noted RTI activist, Shailesh Gandhi
 

Bhasme’s case is not a solitary one. On various e-complaint boards, citizens applying for their passports from Pune’s Regional Passport Office are undergoing mental harassment.  One of the postings amongst many others gives an idea:
 

http://www.complaintboard.in/complaints-reviews/passport-office-pune-l14081/page/3


As for the TCS, S Ramadorai, the then CEO and Managing Director, had said, “We believe that this mission mode project of national importance will make delivery of passport services truly world class in nature. This project reiterates TCS’ commitment to help government deliver citizen services more efficiently through technology and process improvements and will transform passport service delivery to the citizens of India.” 
 

Nearly one year down the line since TCS’s Pune front-end office has become operational, efficient passport delivery is a distant dream.

User

COMMENTS

dr sanjay patil

3 years ago

dr sanjay patil ahmadnagar
I do n`t know who manages the Mundhwa passport office.
But my wife a dentist by profession has travelled to Pune, wasted 16 man hours & still she was returned back on very flimsy grounds. No body to explain why & what are the querries. Smell very fishy behaviour..if at all they want money - should dare to directly ask for it !!

girish deshpande

4 years ago

bhamse's experience is unfortunate. but these are freak cases. i have had EXCELLENT experience at the passport office and have expressed it in as many words to every table i had to go to (TCS, MEA). very efficient and very courteous desk officers. incredible facility. if at all there is delay it is at the police verification end and quite understandbaly so, given the huge load and just a couple of junior level police naik's engaged in this work. so i wouldn't want to buy the argument in this column in its entireity. RTI issue is another matter and i dont wish to comment in this case.

S Gandhi

4 years ago

Government employees are bunch of laggards who take salary from our tax money and enjoy all the perks without any accountability. But watch you, thanks to computer, you all are going to take early VRS (voluntary retirement) and sit back & enjoy at home. Because that is were you all belong. Not to hurt any honest Government employee, which are rare.

Vaibhav Dhoka

4 years ago

It is challenge IN INDIA to name any government agency where you get hassle free and corruption free SERVICE.No chance ever.

Arun Gandhi

4 years ago

My Passport got lost in the Passport Office . After Police Verification at Chatushringi Police Station ( after waiting for 4 Hours ) the file was sent to the Passport Office (along with 15-20 other applicants) ....all Passport files were lost , and instead we got a letter after many months of waiting that now we have to get Biometrics done.
Arun Gandhi,Pune
9270022334
[email protected]

Really unfair

I am a subscriber of Moneylife magazine since long. The newsletter is also good; I never miss reading them. I appreciate the efforts of Moneylife Foundation to throw light on many investors’ issues and other issues. I would like to share my experience with TataSky which may also be the case of many other DTH subscribers.

 
Please note that though the amount involved is meagre, the tactics with which the customers are looted are really unfair.
 
I am a TataSky subscriber with Subscription ID 1025932649. From 15 October 2012 to 29 October 2012, I wanted to opt for a 15-day voluntary suspension of service offered by TataSky, once in a year. However, during the process of the above request, the customer care department also activated the ‘Fun Learning Pack’, without my consent, or knowledge, from 15th October. An amount of Rs48.84 was deducted from my balance during October and November 2012 and the nominal available balance was fully exhausted.
 
My annual subscription is usually, due for renewal at the end of December. However since my account showed NIL balance, I started receiving messages from the beginning of December that all services will be discontinued, if not recharged in time. 
 
While checking the due dates and status of subscription of channel packs, I came to know that an unwanted service of Fun Learning Pack was activated earlier from 15 October 2012, without my knowledge, and I was also charged for it. I found it difficult even to deactivate that unwanted extra service which I never used. It was hard to convince them that in no case, a person would also request for a service on the same day on which he requests for a temporary suspension (since I was going on a vacation) and, hence, activation of unwanted service is quite unfair. 
 
I also told them that I am not going to recharge for any amount and my service must continue up to the regular renewal date. After many long calls for a couple of days Rs9/- was re-credited to my A/c on 21st December (so that my services could last up to my usual renewal date of 27th December). Also, during the past one year, on various occasions of renewal of other channel packs, the same service was offered to me as free, for one month and chargeable thereafter, if not deactivated by subscriber and I could get rid of it with great difficulty.     
 
The reason, why I want to share this incident with Moneylife readers is that similar unfair practices are also used by mobile service-providers offering some download service or caller tune, etc, free for one month, and chargeable thereafter, if you do not discontinue it. It is not possible to track it; if one does not want the service or does not want to pay for it, one needs to initiate deactivation of the service after the free-look period. The services are offered continuously and the customer comes to know only when the amount is billed or deducted from his balance.
 
Mobile service-providers also send ‘Flash Messages’, offering some download, etc. The service is activated just with a click on the flash message. It is even thrust upon customers who use simple low-range handsets that do not even support such service.
 
I am sure Moneylife is a proper forum that can address similar unfair practices with DTH and mobile service-providers as well as the regulator.
Viral Gandhi, Valsad, by email
 
Patronising cooperative banks
Moneylife (27 December 2012) carried a news item under ‘Your Money’: two-thirds of all bank deposits do not have insurance cover. Deposit insurance cover was introduced under the Deposit Insurance and Credit Guarantee Corporation (DIGC) Act 1961, covering all deposits in the name of an individual currently, up to a limit of Rs1 lakh. Further, it said that the balance of DIGC’s deposit insurance fund had Rs30,000 crore, annual inflow of Rs5,300 crore against a demand of only Rs287 crore. 
 
It is 51 years since this scheme began. Given the rate of inflation and the resultant value of the rupee, surely, the coverage of up to Rs1 lakh (decided in 1993) is a pittance! Today, even a chaprasi in any government office, or bank, or even in the private sector, would be earning Rs10,000 per month after 30 years of service. On retirement, therefore, he could certainly cobble up anywhere between Rs7 lakh to Rs10 lakh, inclusive of his PF (provident fund), gratuity, leave salary, savings, etc. If he has to live on the income of this corpus, surely, his deposits need protection. This is required especially since many of them patronise cooperative banks, as they give a marginally higher interest rate on deposits, but are vulnerable to failures.
 
Besides, with senior citizens constantly managing a challenging environment of having to live within the income from their frozen corpus, protection of a significant part of their retirement corpus in banks would help prevent a financial calamity, given the precarious state of many of the financial institutions. 
 
The Reserve Bank of India should, therefore, take immediate steps to enhance this cover limit to Rs10 lakh. I would urge Moneylife to send a petition on behalf of all senior citizens and bank deposit-holders in this regard.
SA Narayan, by email
 
Price discrepancy
I have recently subscribed to Moneylife and I find it really informative, educational and up-to-date. Still, I am a bit confused with the data provided in Street Beat and Stockgrader sections due to which it is difficult to track the performance and ensure necessary action.
 
In the PDF version of Moneylife (27 December 2012) in Street Beat, you have mentioned that Atul Auto has given 19% return while Venus Remedies has given 11% results. Both the stocks have entered in your list on 29th November. However, if I take the data from moneycontrol, on the date of entry and date of issue, you have following data:
29th November to 14th December (when digital version of the magazine was received) —% return:
Atul Auto moved up from Rs161.65 to Rs170.80 with a return of 5%.
Venus Remedies moved up from Rs279.75 to Rs283.30 with a return of 4%.
I am sure if we use any other resource, the data will be more or less same. Hence, my suggestion is that while mentioning the stock price, Moneylife should mention the date of entry; while mentioning the returns, Moneylife should mention the date up to which returns have been calculated. This will give better clarity and also ensure that the data matches the results actually received by the investor.
 
I hope that I will be able to see this incorporated in the near future in Moneylife.
Vivek Agarwal, by email 
 
The price to be taken for checking the performance of a particular stock is either the price mentioned in the issue, or the price prevailing on the last trading day of the week, when the issue hits the stand. The issue dated 29 November 2012 hit the news stand on 15 November 2012. Hence, we took the closing price of 16 November 2012 as the ‘enter at’ price. – Editor
 
Customers are made to run
This with regard to “Banking services is a right of every individual: FM. Will RBI enforce this right for the benefit of the banking public?” by Gurpur. I had an account with Axis Bank, Ghatkopar (Mumbai). I moved to Bengaluru and requested a change of address in their systems. I closed the account in November 2012 and the balance of Rs121 in my account (thankfully, I withdrew the remaining amount using my ATM card) was sent to me after multiple reminders and calls to them. The Bank sent me a local cheque of Mumbai to Bengaluru. Now, I have to incur a collection charge to encash this cheque. A simple check by the Bank and issuing a DD (demand draft) would have saved my time, effort and money. I am sure this is the case with all the banks and the customers are made to run from pillar to post unnecessarily.
M Sudheer
 
Collection costs
This is with regard to “NBFCs allowed to migrate to new standard cheques till March 2013.” What if the borrower refuses? The NBFC (non-banking finance company) is stuck. Collection costs will go up.
R Balakrishnan
 
‘Misuse of the scheme’
This is with regard to “Rajiv Gandhi Jeevandayee Arogya Yojana – How the hospitals and insurance company may profit” by Raj Pradhan. Most hospitals, which are empanelled, are from the private sector. There is allegedly ‘a lot of misuse of this scheme’ by these hospitals, with unnecessary operations being carried out.
Thomas Kuruvilla
 
Eyes wide open
This is with regard to “Credibility of primary markets at stake: SEBI chief.” That is the nature of the beast. Those who apply in IPOs need to do so with their eyes wide open. Nobody questions the credentials of a third-grade company if the price keeps going up after listing. The odds of making money, on listing, are not very different from the odds of making money in a casino.
Nilesh Kamerkar

User

Retirement planning: Why you should avoid the New Pension System

A retirement product should be less volatile, small on charges, big on tax benefits and flexible after retirement. What does the NPS score on these parameters?

The New Pension System (NPS) was compulsorily thrust upon government employees in 2004. It has also been thrown open for subscription to the public four years back, with some incentives from the Government of India. All subscribers registered in FY2010-11 were eligible for getting a contribution of Rs1,000 per year from the government for four years beginning the same year. The NPS is being pushed as an ideal retirement planning product. Is it?
 

Volatile returns not acceptable for a pension planning product

Moneylife had earlier written on how returns from NPS are hugely volatile, even from bond schemes. An analysis of the performance of pension fund managers in the New Pension System (NPS) shows huge volatility in the returns of various schemes and this could put off many savers.

Over the period 2009-11, returns of the schemes for the unorganised sector have varied from 23.51% to -3.15%. This surprising volatility in the returns of NPS, when the investments are supposed to be strait-jacketed, has scared away savers, who simply cannot associate volatility with a pension plan. This factor alone has ensured that NPS for the voluntary sector has remained a non-starter. What ultimately happens would be known only after 30-odd years.
 

While it is true that NPS returns are market-determined and therefore bound to be volatile, Indian savers, who largely shun equities and mutual funds, would not want to be part of something like this, for a very long time.
 

High charges for small investors kill the investable chunk

The next issue is the bigger proportional costs for smaller investor. Other than the asset servicing charges and the Investment management fee which are calculated on a percentage basis, all other charges are fixed per transaction. This would take away a large chunk of money from small time investors.
 

The table of charges given in the original draft offer document shows that if an investor invests Rs6,000 annually in a single investment, a total of Rs311.50 would be charged, which is over 5.1% of the amount to be invested in the first year. This is the most conservative estimate of per transaction charges. It would increase the overall charges, if the number of transactions made is more than one.
 

Arbitrarily increased charges fuel instability

After the initial euphoria of charges being low enough, the Pension Fund Regulatory & Development Authority (PFRDA) increased the Investment Management fee from 0.0009% to 0.25% of the investment made. This makes it a total of Rs326, as charges for investing the same Rs6,000 in the first year, that is, 5.4% of the amount to be invested, most conservatively. Besides that, PFRDA also permitted the fund managers to revise Investment Management Fee once a year, each year. To bring the charges down to 1% of the amount to be invested, you will have to invest a minimum if Rs31,000 in the first year (most conservatively, to save on costs per transaction). Anything below that would be costly in comparison with comparable products.
 

Annuity ties down post retirement income
 

The next worrisome point? NPS does not let you withdraw all your earnings—ever. According to the offer document of the NPS, “On attaining the age of 60 years, you will be required to compulsorily annuitize at least 40% of your pension wealth and the remaining 60% can be withdrawn as a lump sum or in a phased manner; in case, you opt for a phased withdrawal and if you withdraw any time before 60 years of age, you will have to compulsorily annuitize 80% of your accumulated pension wealth. The remaining 20% can be withdrawn as a lump sum.”  When you retire, would you want to invest compulsorily in the annuity product that gives you a taxable return of 7% at an average?
 

Taxable withdrawal reduces money when it is required the most
 

At present, the tax treatment for contribution made in Tier I account is EET, “Exempted-Exempted-Taxed” i.e. the amount contributed is entitled for deduction from gross total income upto Rs1 lakh under Sec 80C. The appreciation accrued on the contribution and the amount used by the subscriber to buy the annuity is not taxable, only the amount withdrawn by the subscriber after the age of 60 years is taxable. NPS is proposed to be included under EEE category.
 

More than three years ago, we were excited by the NPS. But continuous tinkering and no PFRDA Act have changed the scenario. Unless the government addresses all the issues we have detailed, stay away from NPS.

User

COMMENTS

jaideep shirali

4 years ago

One correction in my earlier comment, is "As a tax payer, I am not agreeable to pay fixed returns to babus, when inefficiency and corruption is what I am rewarded with."

jaideep shirali

4 years ago

To me, global trends indicate that in growing economies like India, inflation will move downwards. Interest rates would follow, I have seen fixed deposit rates move from 18% to around 9% now. I firmly believe in the NPS, as pure debt schemes will yield even less going forward, as rates drop. Secondly, the precarious finances of USA & Euro countries show that increasing govt expenditure, including pension bills,can ruin an economy. As a tax payer, I am not agreeable to pay fixed returns to babus, when efficiency and corruption is what I am rewarded with. Equities offer better long term returns and NPS has different options in this regard. If NPS has defects, they must and will be rectified. We moved from physical to e-banking, but not overnight, is'nt it ? Many opinions I have read seem grounded in the past, rather than looking at the future.

D A Bhatt

4 years ago

I am of a personal opinion that all ULFPs( Unit Link Financial Products)should be banned in our country. They are rotten seeds of US/WESTERN economy wrongly implanted in our economy due to non honest liberal views of our financial authorities.In fact they are designed for idle and non growing and non-inflating economies. They are designed for less than net saving bank account return by actuaries. ULFPs procedures and practices flourishes and protects launders and jugglers at cost of Innocent and ignorant middle class clients. As a pension product they are totally misfit.

R Nandy

4 years ago

I agree with what the PFRDA officer had to say regarding NPS.

I will add some other important points:

(1)The CRA charge or Rs 225 should not be seen from the first year perspective.It should rather be seen from a long term perspective.The charge based on the corpus an average middle class person will accumulate is minuscule.There is NPS lite for low earners.

(2)0.25% expense ratio cap for the AUM is a welcome change as the PoP or Fund Managers were not interested in popularizing the product.There might be more interest in the product now.

(3)The debt part is tax free in accumulation stage which is not true
for MF.

(4)Annuity as a product is not clearly understood in India.Annuity
can't be compared with a debt or a equity product nor can the returns
be compared. It is more of a debt product with insurance inbuilt for
guaranteed returns till death(in one variant).So,it is but natural that the annuity return and Tax treatment is akin to a debt product. If EEE comes,well and good.If not,there is nothing to grudge.

Essentially,NPS is a product India was waiting for.Accumulate for
working years with some REAL rate of return and buy an annuity after
retirement.No headache of managing money or rebalancing.

REPLY

Debashis Basu

In Reply to R Nandy 4 years ago

You are singing praises of annuity which you yourself say is like a debt product. And as a debt product how well does it compare with the returns from bank FDs -- at a time when you need the income, that is, at an old age?

Pankaj Gera CFA CFP

4 years ago

No doubt the recent in charges, compulsory annuity at maturity, EET status has taken some sheen out of NPS. However evaluation needs to be person specific. Retirement plan consis of two phases Accumulation Phase & Distribution phase. Strategy for both phase needs to be different. Strategy for distribution phase should be decided 1-2 years before retirement. What other options are available during Accumulation phase? Average of MF folio is 3 years and hence MF have so far not been effective as long term investment alternative. PPF/PF have longer life but their return hardly beats inflation. There are no right or wrong answer.. Thanks Pankaj Gera, CFA (ICFAI), CFP - Gera Wealth Creators

REPLY

Chandanbir

In Reply to Pankaj Gera CFA CFP 4 years ago

Very right Mr Gera. NPS neither lets the investor decide his future in the accumulation phase, nor in the distribution phase. Throughout the accumulation phase, the portfolio remains opaque and investors have limited choice of only three schemes. In the distribution phase, investors will not be paid out their full earnings-their 'right', and over and above that, NPS authorities require purchasing annuities from among service providers of their choice. even if PPF/PF gives lower returns, i would atleast be sure of what amount i would get at retirement, and would now what to do next to beat inflation....in NPS, I would be left in deep sea, surely not what i expect when I am old.

Naveen Fernandes

4 years ago

There was neither good faith, nor honest thinking in the NPS. A compulsory DP at NSDL for NPS is dishonest (any existing DP account would have sufficed). Compulsory 4 deposits a year, without electronic transfer (now rectified) suggested the authorities are from the stone ages. Unilateral hiking of charges, without an exit option is illegal and immoral. Clarity in the portfolio is lacking. I have not seen credit of the Rs. 1,000 promised in the budget. The scheme and its management stinks.

REPLY

D A Bhatt

In Reply to Naveen Fernandes 4 years ago

I am of opinion that Mr. N. Fernandes is totally correct. NPS authorities and PFRDA should clarify their stand and reasons for increasing levies without taking subscriber's consent and without providing options. Also why they have not credited government subsidy of Rs. 1000/- P.A. every year to every private subscribers who are deprived of EPF, EPS and CPF schemes.

Debashis Basu

In Reply to D A Bhatt 4 years ago

NPS is a sarkari financial product. You know what that means. It will be messily constructed, mindlessly implemented and highighhandedly tinkered with by all-knowing babus who have no truck with the reality faced by the savers

D A Bhatt

4 years ago

In spite of my reminder, your honour has not uploaded my reply to Ms Mamta Rohit's article. This is a matter of regret.

REPLY

Sucheta Dalal

In Reply to D A Bhatt 4 years ago

the reply can be uploaded on your own without intervention from Moneylife

MDT

In Reply to D A Bhatt 4 years ago

Sir,
You can click on the reply link below the comment to post your views. All comments, replies are posted automatically on this site.
Thanks,
Moneylife Team

D A Bhatt

4 years ago

Reply to a particular comment may also be uploaded as it is ment for readers information and education.

D A Bhatt

4 years ago

I am surprised to learn that even after 8 years; NPS is a heterogeneous scheme and a unit linked financial product has been termed as a pension scheme. Even annuity they are going to offer at the age of 60 years is going to be much lower than senior citizen's legal entitlements.

Sunil Kolte

4 years ago

Many many thanks Ms Mamta for restoring my shaken confidence. I have been regularly investing in NPS since inception with a big chunk of my savings. Articles like these should be really researched before making public. Also previous comment by Mr Joshi is based on lots of assumptions. Sunil Kolte

Mamta Rohit

4 years ago

1. The article, without the authors by-line appears to have been based on a complete misunderstanding or lack of appreciation of the fundamentals of NPS, as borne out by the attributions of availability of the government subsidy of Rs 1000/- to all the NPS subscribers, whereas it is only applicable to Swavalamban Scheme of the economically deprived. NPS subscribers do not get any subsidy – only marker related returns.

2. The returns of the last one year ending 30th Sept 2012 have outperformed the market as is evident from the following:-

Scheme Average Returns by Pension Fund Managers
Equity (E) 14.52%
Corporate Debt (C) 14.17%
Government Debt (G) 10.82%

3. Unfortunately the author has not done complete home-work on charges as well which have been since reduced. The latest CRA charges applicable to NPS subscribers are Rs 225/- reduced from Rs 280/-

4. Even after taking the upper ceiling of AUM fee of 0.25% p.a. and including all other opening, handling and administrative charges, the overall charges are below 0.50% p.a. This is way below the charges of other financial products not only in the Indian market but also when compared to international pension market making NPS one of the lowest cost pension product in the market. The author (unknown) has talked of “high” NPS charges without comparing the charges to financial products like banking deposits (charges by way of NIM exceeding 3% p.a.), mutual funds (charges between 2-3.5% p.a.) and life insurance company products averaging 8% p.a over life of the product. The overall charges of less than 0.50% p.a in NPS is one of the reasons for the returns of NPS outperforming the market.

5. Annuitisation only helps the retired person tide over his insecurities in later part of life. The return on annuity is not fixed and would depend on the type of annuity provided by Annuity Service Providers (ASPs) and the subscriber will have a choice of selecting the annuity service providers from the IRDA regulated empanelled ASPs with PFRDA.

6. Under DTC the tax treatment for NPS is proposed under EEE and it compares well with any best financial product in the market.

7. No mention has been made for the unique tax treatment for NPS contributions – the employer contribution upto 10% of salary (Basic+DA) being exempt u/s 80 CCD(ii) outside the One Lakh limit of u/s 80C, a treatment enjoyed exclusively for NPS and no other financial product.

8. No mention has also been mentioned of technology driven NPS where the subscriber can view his PRAN account online 24X7, as also complete portability across employers and geographies.

9. We would strongly urge the author (unknown) to get his/her facts right before embarking on passing judgements over the most superior savings product available in the country today

Ms Mamta Rohit (PFRDA)

REPLY

Debashis Basu

In Reply to Mamta Rohit 4 years ago

1. We know very well that the silly scheme of Swabalamban was meant for the weaker sections. We mentioned it ourselves several times. (Please see http://tinyurl.com/adkjtqm ). It was an error to mention that all subscribers were entitled to it.
2. You have not contradicted the fact that returns from NPS is volatile; returns are much volatile in comparison to the tradition pension scheme. Besides, everybody know that one year return and that too on a point to point basis is completely misleading. Please do some reading on how to calculate returns more fairly.
3. The information on charges has been taken from the offer document provided on the PFRDA website as well as on the Central Record Keeping Agency for National Pension System. On both official and publicly available documents, charges they still show as Rs 280.
PFRDA has a habit of focusing on the irrelevant things and not one of the most important aspects - an attractive easily navigable and UPDATED website. You have a right to point out other people's mistakes only when you communicate accurately to the world -- which, given your designation, seems to be part of your job.
4. The article talks about the characteristic arbitrariness that has been introduced into the product by the regulator, by allowing fund managers to revise Investment Management Fees every year, if they ‘wish’ to. This is a scandal. That is the reason the article contains calculations for both-the upper limit of 0.25% and the lower limit, 0.0009%. Besides that, the article clearly conveys that the charges are ‘high’ for those who invest small amounts in the product. You seem to conveniently ignore the context.
5.Your defence of NPS is understandable because you are being paid to do so. But please do not lecture us about the merits of annuities. If you want to educate yourself about how terrible Indian annuity products are, please read Moneylife regularly. The fact is after singing praises of NPS vis-a-vis insurance, you are delivering a lifelong saver of NPS into the jaws of an insurance company! Why would a retired individual want to purchase annuity if he/she wants non-cumulative fixed deposits and earn a fixed, decent interest rate? Or else, if he/she desires a higher return, why would he/she not want to buy bonds instead? A substantial part of the gains of NPS will be lost in the losses of annuities for someone living till 80. Please do some calculations.
6. The tax treatment information has been taken from the PFRDA website.It mentions “NPS is covered under the Income Tax Act, 1961 for tax benefits. Currently NPS has ‘Exempt Exempt-Taxation’ (EET) status where
• Investment up to 1 Lakh in Tier I account is exempted u/s 80C of IT Act
• Withdrawal are subject to tax
However, as per the Proposed Direct Tax Code (DTC), NPS will have Exempt-Exempt-Exempt (EEE) status, which means that there would be no tax at the time of withdrawal.”
The worst part…..? ”Investment made under Tier II account does not entitle ANY exemption on tax.”
The last time we checked, the Direct Tax Code was proposed in 2010 and is still not implemented.
7. No mention has been made of CCD (ii) because it is an option for the employer, not for the employee. By the way how many employers are offering 80 CCD (ii)?
8. Technology is an essential component of EPFO/MF/Insurance... every financial product. Your claim of technology is akin to banks boasting of the use of computers. We are well past that stage. Although we can say for sure that PFRDA is 10 years behind in the Internet Age, given the quality of your website and the speed with which data is updated.
9. We would strongly urge you to set your own house in order first.

Now that we know you exist, we will be happy to send you a set of questions on the functioning of NPS and we do hope you will try to reply honestly. Look forward to interacting with you.

vivek sharma

In Reply to Mamta Rohit 4 years ago

Hi Ms.Mamta Rohit,

I feel that more than the author, you are trying to mislead the readers. Let me state some facts for you.

1) You write that in equity, the NPS has given 14.53% return for the year ending 30th Sep,2012. Please note that from 30-Sep-2011 to 30-Sep-2012, Sensex itself had generated mote than 14% return so a passive investor would also have generated more than 14% return. What is so great about NPS return? (Please refer Sensex return on bseindia.com)

2) DTC is still a dream. How can you say that EEE will continue to be there to NPS.Aren't you speculating?

3)I will prefer to compare charge of NPS to a PPF or a VPF contribution which is more suitable example of retirement corpus creation. Why are you comparing NPS to a mutual fund or insurance?

4)An investor should be allowed to handle his retirement corpus that he has created. Why to tie him upto restricted annuity service providers.NPS is restricting the scope of return for investors?

5) What a big deal in viewing a statement online. Today people live their life online.

6) The article may have some factual errors, but your response is definitely more misleading than the article.

Please ensure that you write the facts and not try to pitch a product just because you represent an organisation.

vivek sharma

In Reply to Mamta Rohit 4 years ago

Hi Ms.Mamta Rohit,

I feel that more than the author, you are trying to mislead the readers. Let me state some facts for you.

1) You write that in equity, the NPS has given 14.53% return for the year ending 30th Sep,2012. Please note that from 30-Sep-2011 to 30-Sep-2012, Sensex itself had generated mote than 14% return so a passive investor would also have generated more than 14% return. What is so great about NPS return? (Please refer Sensex return on bseindia.com)

2) DTC is still a dream. How can you say that EEE will continue to be there to NPS.Aren't you speculating?

3)I will prefer to compare charge of NPS to a PPF or a VPF contribution which is more suitable example of retirement corpus creation. Why are you comparing NPS to a mutual fund or insurance?

4)An investor should be allowed to handle his retirement corpus that he has created. Why to tie him upto restricted annuity service providers.NPS is restricting the scope of return for investors?

5) What a big deal in viewing a statement online. Today people live their life online.

6) The article may have some factual errors, but your response is definitely more misleading than the article.

Please ensure that you write the facts and not try to pitch a product just because you represent an organisation.

D A Bhatt

In Reply to Mamta Rohit 4 years ago

NPS authorities and CRA has reduced AMC as per promise in offer document. But it has increased pop-sp charges and also has introduced new levies under the headings of a) Contibution Charges and b)Account Rebalanceing Charges from private subscribers. This is an unfair practise and may be corrected to win faith and confidence of private subscribers.

Kalyan Ghosh

In Reply to Mamta Rohit 4 years ago

I fully agree with this view. The author's views were totally one sided and I had mentioned so in my comments which was not published. Author has no idea what a pension scheme is can be obtained when he opposes annuity.

Mr Prakash Padmakar Joshi

4 years ago

A BRIEF NOTE ON THE ‘RETIREMENT PLANNING’
WITH A CORPUS OF Rs.100.00 Lakhs. {ONE CRORE}
A person retiring at the age of 58 if able to build a ‘Corpus’ of Rs. 100.00 Lakhs by the time s/he attains the age of 62 by adopting the following method, will be able to financially survive satisfactorily, for next 28 years i.e. till s/he attains the age 90 as explained hereunder :----

Stage – I > Initial Building of ‘Corpus’ of Rs. 100.00 Lakhs.

[1] If necessary, even by Sale the ownership properties if you are really not keen in passing on the same to the next generation out of sheer sentiments. [If the said property is not an ancestral one and the siblings are also not dwelling there-in]. In fact you are only changing the nature/form & style of the ‘asset’ as per your convenience.[By the way “Reverse Mortgage” is not a good idea] e.g. Sell the property and invest the entire Capital Gains in three (3) years lock –in-Bonds, carrying a ROI @ 6 % p.a. You may also seriously think and explore the possibility of shifting to a “Gated Community for Sr. Citizens – Retirement Home” as a viable practical option taking in to consideration various long term benefits.

[2] Out of the remaining, put 60% + the Savings / PPF / PF / Gratuity / Leave encashment etc… and other liquid investments made so far in open ended Diversified Equity MFs in ‘Growth’ option. The selection of appropriate Schemes, subject to the annual review is a crucial factor. The remaining 40% should certainly be placed in Bank / Co. FDs / Secured NCDs with an option of getting interest at regular quarterly intervals.

In overall for survival, one should get at least an average return of about 9% p.a. during this intervening period of three years i.e. from the age 59 to 61.

Now (after three years) at the age of 62 one is ready with the total investible Corpus of Rs. 100.00 Lakhs including redeemed investment from Capital Gain Bonds as mentioned above. This Corpus is to be invested by churning and rebalancing total available amount as under: ---

[1] 60% Corpus in the open ended Diversified Equity MFs with ‘Growth’ option only. Assumed average ‘returns’ are anticipated @ 14% p.a. Go for withdrawing profits (cream) quarterly, as tax free LTCGs.
[2] Balance 40% Corpus to be placed in Banks’ FDs {breaking FDs of Rs. 4.00 Lakhs X 10 = Rs. 40.00 Lakhs} with average interest @ 9% p.a. on quarterly rests.

This combination will give overall average return @ 12% p.a. Further, the long term profits \ gains made out of MF investments are non taxable under the new DTC and the total ‘interest’ income of Rs. 3.60 Lakhs which is to be smartly divided between the husband and wife at the beginning itself so that their (individual) annual incomes will be below taxable limits.

This way as discussed above, the total income of Rs. 12.00 Lakhs for the first year is totally tax free. In all the subsequent years this 60:40 ratio giving stipulated returns is required to be maintained by properly rebalancing the total Corpus available at the beginning of the each subsequent year so as to ensure that on an “average” a tax free yield (income) is achieved @ 12% p.a. for the year after year regularly.

Stage – II > Living peaceful Life smartly!!!

Now assuming that one is required to spend a total amount of about Rs. 5.00 Lakhs (for both, husband and wife) in the first year (i.e. Rs. 41,667/- p.m.) which gradually increases (every year, by year) up to Rs. 65.55 Lakhs in the 28th year (i.e. about Rs. 5,46,250/- p.m.) by assuming an average inflation rate @ 10% p.a .on YOY basis by the time one reaches at the age of 90. The remaining amount Rs. 22.67 Lakhs at this stage will take care of the funeral and last rites. Now, while spending one should preferably exhaust the fixed income first [presumed @ 9%] and only shortfall be spend from the variable income [presumed @ 14%].Thus if you live such long, you may be living a reasonably comfortable life but, eventually NOT leave any thing (remaining) to your heirs / siblings.

By adopting the above method the original ‘Corpus’ of Rs. 100.00 Lakhs gets increased up to Rs. 237.06 Lakhs at the end of 19th year and then it certainly lasts up the end of 28th year i.e. by the time one reaches the age 90. However, the severe and unavoidable impact of run-away inflation really starts taking its toll after 19th year (i.e. from 20th year and onwards) hence the yearly generated total income by itself starts proving ‘insufficient’ to meet both ends and hence for each and every subsequent year after 19th year, one will have to resort to compulsorily draw from the ‘Corpus’ which starts depleting fast and almost gets exhausted by the end of the 28th year merely to the tune of Rs. 22.67 Lakhs as shown in the excel table.

Beat the inflation with smart moves and reasonably tolerable risk. You can’t beat the inflation if you don’t take ‘adequate’ exposure in EQUITY and simply try to overcautiously put all the money in Bank/Co. FD / Secured NCDs, Post Office SS, as the ‘returns’ available from later are highly ‘insufficient’ to take care of the ever rising inflation. If you will remain too conservative all the corpus money will be exhausted by 19th year end itself and you will be left with nothing if, living any further more.

To achieve the above you will need a good (intelligent), trustworthy & friendly advisor / consultant
for your financial planning. Please see the attached excel file for detailed arithmetical calculations.

Khub jiyo retired zindagi khushi aur shaanse!!!

FROM:--- [email protected]

REPLY

Param

In Reply to Mr Prakash Padmakar Joshi 4 years ago

is this a response to this NPS article or a sales pitch?

jaideep shirali

4 years ago

I have a few observations to make on NPS. Firstly, NPS must be compulsory on govt employees at all levels. As tax payers, why should we be funding an assured return pension scheme, which increases due to Pay Commissions and DA hikes regularly ? In return, we do not get even an unemployment benefit! Secondly, NPS returns would stabilise in a few years and going by the experience of good debt and equity funds, one should see good and steady returns in the long run. Remember that most investors would be invested for atleast 10 yrs. Thirdly, NPS expenses are much lower than ULIPs or even mutual funds on the whole. NPS has an asset allocation Auto Choice, which decreases equity allocation with increasing age. This helps the prudent investor. The annuity and EET policies may be modified with the Pension Bill. I feel that many positives have been glossed over in this analysis and NPS deserves investment.

Param

4 years ago

i knew something was messed up when such a ridiculous expense ratio was mentioned... even vanguard charges 0.1% on index fund at the cheapest level, and the asset base is in 100B$.
i'm surprised pfrda did not question the longevity of such a low expense ratio - at least it should have added a clause restricting the quantum of increase...

DB DESAI

4 years ago

Retirement Planning should not be construed as buying any one plan from insurance company, mutual fund or NPS but it should be only an idea to accumulate money as much is required from different ways and means during the working life and also it should be invested when regular income is required from investments only considering the best suitable options at that time. Approch must be very flexible and a combination of short, medium and long term investment ideas. It should use all asset classes, all opportunities. End of the day the only thing which matters is the money is your hand.

We are listening!

Solve the equation and enter in the Captcha field.
  Loading...
Close

To continue


Please
Sign Up or Sign In
with

Email
Close

To continue


Please
Sign Up or Sign In
with

Email

BUY NOW

The Scam
24 Year Of The Scam: The Perennial Bestseller, reads like a Thriller!
Moneylife Magazine
Fiercely independent and pro-consumer information on personal finance
Stockletters in 3 Flavours
Outstanding research that beats mutual funds year after year
MAS: Complete Online Financial Advisory
(Includes Moneylife Magazine and Lion Stockletter)