The Hindu : National : Trade unions for higher EPF rates

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Wednesday, Jun 30, 2004

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Trade unions for higher EPF rates

By Our Special Correspondent

NEW DELHI, JUNE 29. On the eve of the crucial meeting of the Central Board of Trustees tomorrow to decide on the rate of interest on deposits of the Employees Provident Fund subscribers, there were indications that the prevailing rate of 9.5 per cent would not be altered for this fiscal.

The Government is under tremendous pressure from the Central Trade Unions, which are opposed to any change in the prevailing rate. In fact, they are pitching for a higher rate of interest.

Though a final view will be taken at the Board meeting to be presided over by the Union Labour Minister, Sis Ram Ola, it is unlikely that the interest rate will be slashed, notwithstanding a recommendation said to have been made by an EPF Board sub-committee for scaling it down to eight per cent.

The Board will also consider the projected income on investments and interest payments for this fiscal.

Trade unions, cutting across party lines, have demanded a higher rate of interest of 12 per cent paid last in 1989-90, saying it would still be well within the "limits" and not lead to a deficit for the country's largest provident fund.

On the contrary, the Finance and Investment Sub-committee, which met here today, feels the interest rate cannot be more than 8 per cent for the three crore subscribers in view of the EPFO's declining returns from its investments.

Moreover, over 70 per cent of the EPF accounts had less than Rs. 4,000 due to early withdrawals and about one crore subscribers accounts were yet to be credited. Besides, 80 per cent of the EPFO's investments were in Special Deposit Schemes which offer only 8 per cent return. Any change in the EPF rates is bound to have political implications, particularly with the Left parties part of the United Progressive Alliance Government.

Once the CBT decides on the issue, it will be referred to the Finance Ministry after which the Labour ministry will issue the necessary notification.

The EPFO panel's proposal assumes importance in the light of the Finance Ministry's suggestion on lowering the EPF rate, as there is no instrument in the market promising high interest rates. Also the 9.5 per cent interest (including the Golden Jubilee bonus of 0.5 per cent) for 2003-04 had already led to deficit of Rs 298.21 crores. The Finance Ministry is yet to ratify the interest rates on EPF for 2002-03 and 2003-04.

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