EPF rate delay to hit 2 million subscribers

The failure of the government to decide on the interest rate for provident fund is likely to hit around two million subscribers.

The government yesterday once again got cold feet on the issue and the meeting of the Central Board of Trustees (CBT) of the Employees' Provident Fund Organisation (EPFO) decided not to take up the matter despite the fact that it was on the agenda.

The CBT had revised the interest rate for provident fund last time in April 2006 "" 8.5 per cent for 2005-06, as against the previous year's 9.5 per cent. Therefore, no interest has been paid for deposits after April 2006.

The CITU secretary and CBT member, WR Wardarajan, said 1.5 lakh subscribers left every month. "Around 150,000 to 200,000 subscribers have left since April 2006, without the interest on their deposits for the period after that month," he said.

Central Provident Fund Commissioner A Viswananthan said this kind of stalemate on PF interest rates has had a precedent. Decision on interest rates could not be taken for the two years before 2006 too, he said. "But, we reviewed all those cases and gave supplementary cheques to subscribers who left in the interim period. I haven't heard any complaints of people not getting interest payments," he added. However, once a decision was taken, we would give them their supplementary payments, he said.

Meanwhile, trade unions expressed concern over the government's lackadaisical attitude in handling the issue.

"While the agenda clearly spelt out a discussion on interest rate of 8 per cent for the fiscal 2006-2007, the EPFO gave a figure of 8.2 per cent for the following year. Yet, Labour Minister Oscar Fernandes deferred the decision saying that no decision has been made on 2007-2008 and more time was required. The rate of interest till April 2006 was 8.5 per cent. A decision has to be taken for the period after that," a trade union leader said.

"Naturally, the government would find it difficult to first reduce the interest rate from 8.5 per cent to 8 per cent for 2006-2007 and then raise it again to 8.2 per cent for the following year," Viswananthan said.

The trade unions, including INTUC, the Left, and United Progressive Alliance (UPA) partners like the Rashtriya Janata Dal (RJD), have been putting pressure on the government to revert to the 9.5 per cent interest rate.

Sources said the government was being persuaded not to lower the rates, considering the rising inflation. Further, the forthcoming Uttar Pradesh elections and the Congress debacle in the recent Punjab and Uttaranchal elections are stopping the government from arriving at a decision on the PF interest rate.

The EPFO has a total corpus of over Rs 1,40,000-crore, of which around Rs 84,258 crore is in the employees' provident fund account, while the rest is under the employees' pension scheme.