 "Bandaru Dattatreya")
With fissures between the finance and labour ministry becoming wider over interest rate on the Employees' Provident Fund (EPF), Labour Minister Bandaru Dattatreya on Thursday said he will meet Finance Minister Arun Jaitley for an amicable solution on the issue.
"We will have a dialogue with the finance ministry to get a solution soon," Dattatreya said, on the sidelines of a CII event. But he implied the decision to recommend a rate of 8.8 per cent for the year 2015-16 was taken by the Central Board of Trustees (CBT) after consultations with all stakeholders.
Business Standard had earlier reported the labour ministry has decided to stick to 8.8 per cent rate and is planning to contest the finance ministry's recommended 8.7 per cent rate.
"Last year, based on our surplus, we recommended a rate of 8.75 per cent. Since we had more surplus this year, trade unions asked for nine per cent, while our financial committee recommended 8.95 per cent. Reaching a consensus, we arrived at a rate of eight per cent," the minister said. He maintained the finance ministry had suggested 8.7 per cent, keeping the overall economic scenario in context. According to the Financial Audit and Investment Committee (FIAC) estimates, the EPFO would be left with a surplus of Rs 673 crore, after giving an interest of 8.8 per cent for 2015-16.
At 8.7 per cent interest rate, the surplus would be Rs 863 crore.
In fact, FIAC - comprising representatives of employees, employers and the government - projected EPFO would earn Rs 34,844 crore in 2015-16, which would be sufficient to offer an interest rate of 8.95 per cent to the retirement fund body's 50-million subscribers.
However, in its reasoning about declaring a lower interest rate, the finance ministry said the ministry's advice was based on math. It said the interest income earned on 90 million inoperative accounts having a principal of more than Rs 35,500 crore is not distributed among them but rather distributed among existing account holders based on a CBT decision. But, this windfall for existing operative accounts will not be available from next year since CBT, in its recent meeting, has taken a decision to pay interest for inoperative accounts which it stopped since April 1, 2011.
LABOUR'S LOVE NOT LOST
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February 16: EPFO recommends a rate of 8.8 per cent for 2015-16
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April 25: Labour Minister Bandaru Dattatreya tells Lok Sabha that FinMin has ratified a rate of 8.7 per cent
- April 28: Dattatreya says he will have a dialogue with FinMin on the issue
