EPS deficit first, labour min told

The finance ministry has asked the labour ministry to first deal with the Rs 22,000-crore deficit in the Employee Pension Scheme before deciding on the interest rate for this year.

The labour ministry has to convene a meeting of the central board of trustees (CBT) of the Employees Provident Fund Organisation to decide on the rate. The last CBT meeting, scheduled in July, was cancelled at the last moment.

Officials said the finance ministry wanted to deal with the EPS problem before it went out of hand.

"It may be possible to initiate corrective steps now. We may be left with only a few options if we delay it any further," said an official. He added that the EPFO should initiate steps to increase the pay-ins and reduce the payouts.

The ministry is in favour of stopping withdrawals from the scheme, until the member completes 10 years of service.

At present, employees, who are members of the scheme, for less than 10 years have the option of either availing the withdrawal benefit or a scheme certificate which makes it possible for them to withdraw after attaining 58 years. Officials said some European countries used the same tool to make up the deficit.

The investment committee of the EPFO has recommended eight per cent interest rate for the current financial year.