EPF board meet on rate before parliament session

The Central Board of Trustees of the Employees' Provident Fund is likely to meet before the winter session of parliament to recommend interest rate for financial year 2005-06 (April-March) on deposits, Labour Minister K. Chandrasekhar Rao said Tuesday. The winter session is likely to start in the fourth week of November.

"Secretary labour (K.M. Sahni) is out of town and once he's back, we will sit down and decide on the date of the meeting," Rao told reporters on the sidelines of a meeting with China's deputy labour minister, Wang Dongjin.

"We are expecting to hold the meeting before the winter session of parliament," he said. Employees' Provident Fund is the largest non-governmental provident fund with a corpus of 720 billion rupees.

The EPF Central Board of Trustees had recommended an interim interest rate of 8.5% for 2004-05 in August last year. The rate was revised to 9.5% in May, which was later notified by the government.

At 9.5% interest rate for 2004-05, the EPF corpus is likely to face a shortfall of around 7.16 billion rupees. The gap will be bridged by withdrawals from special reserve fund.

The EPFO board is now under pressure to announce a more realistic rate for 2005-06""in line with its earnings.

Labour Secretary Sahni had said last month that EPFO may not be able to pay 9.5% interest rate on deposits for the current fiscal.

About 80% of the EPF corpus is invested in the Special Deposit Scheme, which earns an annual interest rate of 8%.

The EPFO had earlier asked the government to raise the interest rate on the Special Deposit Scheme to avoid eating into the special reserve fund. However, the proposal was turned down.