Govt orders payment of 8.5% EPF rate

On the eve of Dusshera, the Central Provident Fund Organisation today asked all regional provident fund commissioners (RPFCs) to implement the government's decision to offer 8.5 per cent interest on EPF accounts.

In July, the Central Board of Trustees (CBT) of the Employees Provident Fund (EPF) had sought to credit 8.5 per cent interest to the accounts of EPF members for 2006-07. The Central government has now accorded its approval for notifying the specified rate of interest for the year.

The RPFCs have also been directed by the CBT and Minister for Labour and Employment Oscar Fernandes to issue the annual statement of accounts for 2006-07 as soon as possible.

The much-awaited decision of the trustees and the government comes after the acceptance of a report of a sub-committee appointed to look into the accounts of the Employees Provident Fund. The report said that the deficit of Rs 449.90 crore would be met from the interest suspense account. The expected interest income during 2006-07 would be Rs 7372.67 crore while the liability at 8.5 per cent rate would be Rs 7822.57 crore, said officials.

Fernandes earlier said that according to the report of the sub-committee, there was an accumulated balance of Rs 347.78 crore, a surplus of the past years lying in the interest suspense account, Rs 185.69 crore in the contingency reserve fund (CRF) and Rs 56.69 crore in the special reserve fund.

After meeting the deficit of Rs 449.90 crore, the EPF Organisation (EPFO) would be left with a surplus of about Rs 83 crore while leaving aside Rs 56.69 crore in the special reserve fund, the minister had said.

The Left-affiliated labour unions, pressing for an interest rate of 9.5 per cent, protested the decision. "The decision is in violation of the commitments in the UPA's common minimum programme and the prime minister's assurance that the rate will be kept at 9.5 per cent," Varadarajan of the Centre of Indian Trade Unions (CITU) and a member of the EPF Board, had told Business Standard earlier. "The decision will cast a shadow on the next year's (2007-08) rate. In the present high interest rate regime in the financial sector and with high inflation, what will an employee get from this 8.5 per cent rate?," he questioned.

"A decision on the rate of interest for the current financial year will also be taken soon," said Central Provident Fund Commissioner A Viswanathan.

The Employment Provident Fund Scheme, 1952, requires that the rate of interest be credited to the account of each member at a rate determined by the Central government in consultation with the trustees.