2000 firms, including IOC, ONGC have defaulted on EPFO payments

Almost 2,000 corporate entities have defaulted in making payments to the Employees' Provident Fund Organisation (EPFO) amounting to Rs 1,698.9 crore as on November 2004.

This is 118.69 per cent higher than the default figure posted in the preceding year. Corporate entities such as HMT Ltd, Indian Oil Corporation, ONGC, Bellary Steel, Tata Mills, Brooke Bond, Maruti, Garware Synthetics and a host of 1,866 provident trusts have failed to pay up dues.

This is an old story where establishments default in making payments. What's interesting today is that EPFO, which is facing a shortfall of Rs 927 crore if it is to meet an assured return of 9.5 per cent, could see a change in the liabilities should payments be made.

Of the total default figure, exempted provident trusts "" that is those which manage the employees' PF corpus themselves "" owe EPFO Rs 613.92 crore. This amount essentially is towards administration and inspection charges that need to be paid to the EPFO.

As these funds are managed by individual corporates' own PF trust, the government body is not liable to make good the return of 9.5 per cent. When payment by exempted funds is made to EPFO, this will help to bring down the shortfall.

On the other hand, 1,744 unexempted funds owe EPFO Rs 1,085.39 crore. Majority of the defaults is in the state of Maharashtra largely on account of PF trusts of textile mills failing to put in employees' contribution.

This means that had these funds been contributed to the EPFO, the latter's liability towards making good the 9.5 per cent assured return would have increased.

Unlike most establishments where there is a double entry system, the EPFO operates on a single entry system. "EPFO is not able to identify its liabilities from its assets. A double-entry system would ensure credit and debit according to the contribution of individual PF trusts," said senior PF officials.

Today the interest income of the EPFO has been estimated at Rs 5,919.42 crore. However, at an assured guaranteed rate of 9.5 per cent, this would mean an outgo of Rs 6,846.57 crore, thus leaving a shortfall of Rs 927.15 crore.