Provident fund rate reduced to 8.5%

Despite the reduced rate, the EPFO would make a projected loss of Rs 206 crore in 2004-05.

The Employees' Provident Fund Organisation (EPFO) decided to cut the interest rate on its deposits by 1 percentage point to 8.5 per cent.

Announcing the decisions taken at the meeting of the central board of trustees of the EPFO, its chairman and Union Labour Minister Sis Ram Ola told reporters there was a broad consensus on the rate.

However, trade unions supported by the Left parties said they would call for a demonstration against the cut on September 20.

Former Labour Minister Sahib Singh Verma had reduced the rate to 9 per cent in 2003-04 but added a 0.5 per cent golden jubilee bonus to all susbscribers to keep the effective rate unchanged.

Today's decision came after a protracted meeting of over four hours, after the central board of trustees had thrice postponed the issue since June 30.

The issue had developed into a bone of contention between the Left parties and the Congress, with even Prime Minister Manmohan Singh intervening.

Ola said despite the reduced rate the EPFO would make a projected loss of Rs 206 crore in 2004-05. The total corpus of the organisation on March 31, 2004, was Rs 1,28,000 crore, making it the largest provident and pension fund in the country.

The finance ministry, which has set an 8 per cent rate on similar small savings instruments for this fiscal year, has to ratify the EPFO's decision.

The decision will lower the applicable interest rate for the current fiscal year on the monthly deposits of over 25 million private sector employees.

The Left-affiliated trade unions, including CITU and AITUC, have called the decision deplorable. Hasubhai Dave of the Bharatiya Mazdoor Sangh, who attended the meeting, said, "We will demonstrate against the decision in Delhi and Kolkata on September 20."

Ola said today's meeting also recommended a hike in the interest rate on the Special Deposit Scheme from the existing 8 per cent. The EPFO parks 78 per cent of its funds in the Special Deposit Scheme.