Finmin rules out EPFO subsidy

Hours after the labour ministry sought a bailout to meet the Rs 927 crore deficit due to hike in employee provident fund (EPF) rate to 9.5%, the finance ministry ruled out any subsidies or hike in special deposit scheme (SDS) rate.

"If we have any reserves in the Employee Provident Fund Organisation (EPFO), they will be made available. For the rest, we will be asking the finance minister to give from his kitty. Anything extra has to be charged under the consolidated fund of the government," labour minister K Chandrasekhar Rao said.

However, expenditure secretary Dhirendra Swarup said, "there is no plan to give subsidies," and there was no move to increase the interest rate on SDS in which EPFO invests a bulk of its deposits or allow it to park funds in high interest yielding postal deposits.

EPFO, with a corpus of about Rs 1,40,000 crore, invests about 80% of its funds in the SDS, which at present yields only 8%. In view of this, the labour ministry as well as trade unions had demanded that the SDS rate be hiked in a bid to make the EPF rates sustainable.