The Hindu : National : Unions hail decision on EPF interest rate

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Sunday, May 29, 2005

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Unions hail decision on EPF interest rate

Staff Correspondent

NEW DELHI: The Central Trade Unions have welcomed the Labour Ministry's decision to fix the rate of interest for the Employees Provident Fund (EPF) subscribers at 9.5 per cent. But they expressed unhappiness at raising of additional funds from its Special Reserves.

The Finance Ministry's refusal to accept either of the two alternatives mooted by a sub-committee has forced the EPF Organisation to dip into the Special Reserve Fund (SRF) to bridge the gap between the interest earnings on EPF investment and a pay-out of interest at 9.5 per cent, the Centre of Trade Unions (CITU) said in a release here on Saturday.

The sub-committee had suggested that a one-time budgetary support be provided or the interest rate on the Special Deposit Scheme be enhanced.

`Dubious route'

"This is a dubious route to `honour' the Prime Minister's commitment not to reduce the interest rate on EPF and has ominous portents for the future," it said.

The SRF was constituted out of forfeiture of employer's contributions in respect of exiting the EPF before completion of five years of service.

This forfeiture clause in the EPF scheme had been deleted in 1990 and there is no further inflow into the SRF, except interest accruals.

This SRF is utilised to help outgoing members or their nominees or heirs, where an employer had defaulted in payment of the Provident Fund contributions collected from workers.

"The move to draw around Rs. 716 crores of a total of Rs. 950 crores will almost empty the corpus built over four decades," the release said.

The workers (except the Indian National Trade Union Congress) had opposed this proposal to divert funds from the corpus and wanted the Labour Ministry to again approach the Finance Ministry for enhancement of the rate of interest on the Special Deposit Scheme.

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