9.5% EPF rate for 2002-04

Finance Minister P Chidambaram today announced his ministry had approved the 9.5 per cent interest on Employees' Provident Fund (EPF) for 2002-03 and 2003-04. The rates will take effect after a notification by the ministry of labour.

Speaking to reporters, Chidambaram said a decision on the rate for 2004-05 would be taken after the Central Board of Trustees (CBT) of EPFO recommend the rate.

The approval for 2002-03 and 2003-04 comes after about two years of reluctance on part of the finance ministry to ratify the rate. The ministry had maintained that the rate was not sustainable considering that the returns on EPFO investment were lower.

An official communication from the finance ministry was awaited, said a labour ministry official.

The CBT, headed by the labour minister, had recommended an interest rate of 9.5 per cent for 2002-2003 and 2003-04 and an 8.5 per cent interim dividend for 2004-2005.

The interest rates needed to be notified by the labour ministry for them to become effective, but pending the finance ministry clearance, it could not be done.

Officials said the CBT's formal approval for the current year would be required before the labour ministry could issue the notification.

"The CBT, comprising employees' representatives, is expected to meet soon to clear the 9.5 per cent interest rate for 2004-05," said an official.

Official figures released by the labour ministry put the deficit at Rs 927.15 crore after a 9.5 per cent interest rate for 2004-05. The interest income was projected at Rs 5,919.42 crore when the CBT had recommended an 8.5 per cent interim interest rate in August last year.

The liability on account of this rate will have been Rs 6,125.87 crore, leaving a deficit of Rs 206 crore.