EPF rate may be restored to 9.5%, says Rao

The Central Board of Trustees (CBT) of the Employees Provident Fund Organisation (EPFO) today ratified the interim 8.5 per cent interest for outgoing EPF subscribers for 2004-05, but would soon meet Prime Minister Manmohan Singh and Finance Minister P Chidambaram to restore it to 9.5 per cent as demanded by central trade unions.

Labour Minister K Chandrasekhar Rao today said efforts would be made to restore the EPF interest rates to 9.5 per cent.

"A new mechanism will be devised to ensure higher returns on investments of the EPF money," Rao told reporters after a marathon five-hour meeting of the CBT, chaired by him.

Rao added that he would also discuss with Chidambaram the issue of whether the EPFO would be allowed to invest in the Special Deposit Scheme (SDS) for another year. The SDS comprises 80 per cent of the EPFO corpus.

The CBT had recommended interest rates of 9.5 per cent and 9 per cent for 2002-03 and 2003-04, respectively. For the current fiscal, the CBT in August recommended 8.5 per cent as an interim rate of interest.

The government, however, has not yet issued any notification with respect to the interest to be paid to EPF members for the three years.

The labour ministry has asked the EPFO to make efforts to realise the arrears, penalty and damages during the current fiscal year. It recovered Rs 727 crore during the first six months of 2004-05. Around Rs 1,862.80 crore were outstanding as EPF arrears at the end of the last fiscal year.

Of this, more than half is not currently recoverable on account of either disputes in courts or establishments having gone into liquidation or declared sick by the Board of Industrial and Financial Reconstruction.