 "EPFO plan to pump in Rs 55,000 crore to aid sinking rupee, g-secs")
EPFO has proposed pumping in a whopping Rs 55,000 crore per year into government securities market to fill the fund gap created by withdrawal of FIIs.
This it has proposed to do if the wage ceiling for new membership was raised from the present Rs 6,000 to Rs 15,000. Such a move it says would add Rs 55,000 crore additional flow of funds each year.
There is a fund gap in the Government securities sector of Rs 24,000 crore created by the withdrawal of FIIs following the depreciation of the rupee..
The proposal has been made to the Finance Ministry in this context.
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Under the 2008 investment pattern likely to be notified by the Labour Ministry 55% of the flow would go to Government bonds. As against the gap of only Rs 24000 crore in Government securities, Rs 30,000 crore would be available for the same, the EPFO says as per the proposal that is currently being discussed by the two ministries.
The EPFO has pointed out that the funds sourced from a compulsory deposit scheme would be a reliable source for investment in the cash starved sectors of infrastructure, power and manufacturing for which FIIs have proved to be an unstable source.
The depreciating rupee has led to withdrawal of FIIs from the debt market to the tune of $ 11 billion. And the supply demand mismatch has witnessed increase in Government securities rates from 7% to 9.25% in the last four months.
An increase in outflow of funds from EPFO would mean more money to buy GSecs which will lead to rates going down and thus saving Government money. Recently GSecs gained up to 9% due to redemption pressure, Labour Ministry sources say.
| EPFO current inflow per year: (2011-12) Rs 70,000 crore |
| EPFO payments per year: (2011-12) Rs 38000 crore |
Additional inflow on increase of wage ceiling for membership: Rs 55000 crore
55% of EPFO funds committed for G Secs: Rs 47000 crore