Finmin asks EPFO to rethink 9.5% rate

The finance ministry has asked the employees provident fund organisation (EPFO) to reconsider the 9.5 per cent interest it had recommended for 2004-05.

The central board of trustees (CBT) is expected to discuss the issue on June 30 when it meets to consider the interest for the current financial year.

Prime Minister Manmohan Singh and Finance Minister P Chidambaram had agreed to the 9.5 per cent interest rate after pressure from the Left.

The CBT had subsequently agreed to the proposal even though it would mean that the EPFO would have to use its own reserves to bridge the Rs 700-crore deficit. The proposal was then sent to the finance ministry for concurrence.

Officials said the finance ministry had asked the CBT to reconsider the proposal following consultations with the Prime Minister's Office.

They added that the move would lend UPA the bargaining power to go ahead with the Bhel disinvestment and also open doors to foreign direct investment in retailing.

The government had agreed to the 9.5 per cent interest rate along with raising the FDI limit in telecom from 49 per cent to 74 per cent. The government is also trying to amend the Electricity Act, 2003, to placate the Left.