Mercer to advise EPFO

Trade unions oppose move to hire global consultant

The trustees of Employees' Provident Fund Organisation (EPFO) have decided to appoint global consulting firm Mercer Human Resources for finding new investment avenues so that it can invest its funds estimated at Rs 1,61,675.62 crore. The global firm is to suggest radical changes in investment patterns for the next 10-15 years.

The consultancy firm will suggest methods to "fine tune" the existing investment pattern in consultation with the finance ministry. It will also suggest methods to minimise idle funds and examine legal issues involved in investments of provident funds in equities.

Besides, Mercer will also design and develop an institutional and legal framework to facilitate investment of social security funds like provident funds in multilateral guaranteed international investment instruments.

Mercer will also suggest methods for identifying investment risks, besides recommending international best practices of management and governance for portfolio investment. "We have appointed the consultants to suggest improvement in the pattern of investments," Labour Minister K Chandrasekhar Rao told reporters here today.

EPFO is faced with a deficit of around Rs 927 crore after Finance Minister P Chidambaram's announcement of a 9.5 per cent interest rate for its four crore provident fund beneficiaries for the three years starting 2002-03.

A majority of the trade unions opposed the Central Board of Trustee's decision to appoint Mercer, saying it should have been left to the finance ministry, which approves EPF investments, to take a decision.

Asked about the ways and means being considered to bridge the Rs 927-crore shortfall, the minister said, "The government will manage to pay the money. It is better people stop worrying about it."

He parried queries as to whether the EPFO will approach the finance ministry for support and said, recommending a 9.5 per cent interest rate for the current year was not on the agenda. He said the issue would be taken up at the next EPFO meeting in March in view of the model code of conduct.

He said Mercer would submit a report based on which the CBT would take a view on restructuring investment patterns, including parking funds in equities, postal deposits and National Saving Certificates.

Mercer will have to submit its report within four months of appointment and will get Rs 34 lakh as one-time consultancy fee.

CBT member and CITU leader W R Waradharajan said except the Congress-affiliated INTUC, all the other central trade unions opposed the appointment of Mercer, alleging that the global arm of the firm was embroiled in a scam.