EPF defers decision on interest rate

The Central Board of Trustees of the Employees Provident Fund Organisation (EPFO) has deferred a decision on the rate at which interest should be paid on deposits to the fund to July 20.

This was stated by WR Varadarajan of Communist Party of India (Marxist) affiliated Centre for Indian Trade Unions (Citu), after a meeting of the Trustees today.

He said the left supported trade unions had rejected the government representatives' proposal in the meeting to reduce the rate to 8 per cent for 2004-05.

Instead all the left unions including Aituc, Utuc and Hms have asked Labour Minister Sis Ram Ola in a written letter, to re-examine the decision on maintaining the rate of interest at 8 per cent on the special deposit schemes, in which the EPFO parks 80 per cent of its investments.

The unions have also demanded an early meeting with Prime Minister Manmohan Singh to press for a review of the budgetary proposals on small savings, before the CBT takes any decision on the rates.

In their letter, they have requested the minister to lead the delegation of the Trustees to meet Singh.

But reflecting the differences that have cropped up among the trade unions, the Congress supported Intuc has instead toed the government line.

This is the second postponement of the CBT's meeting on the issue. In its last meeting on June 30, it was decided to wait for the budget to make a decision on the applicable rate of interest on its deposits of Rs 1,28,036 crore for 2004-05.

Finance ministry officials told the meeting that 8 per cent rate of interest on announced by Finance Minister P Chidambaram on SDS was a clear indication that the rate of interest on the EPF deposit rates should also be lowered to the same rate.

But ministry officials acknowledged after the meeting, that the government may not wish to further alienate them during the crucial passage of the Budget through Parliament.

The unions want the government to provide a subsidy in the budget to ensure that the EPFO, which is the largest provident fund organisation in the country could at least stick to the present 9.5 per cent rate of interest paid in 2002-03 and 2003-04.

The current rate of interest of 9.5 per cent paid on the Employees Provident Fund accumulations has left a hole of Rs 298.21 crore in the balance sheet of the Fund for 2003-04.

In his meeting with the trade union leaders, the Prime Minister had asked them to ensure that the government did not have to step in with a bail out package, on the similar lines given to erstwhile UTI. The interest rates for depositors to the EPF, was brought down to 9.5 per cent in 2002-03, from 11 per cent, prevailing since July 2000.

It was at 12 per cent since 1989-90.