With reference to “No rollback, please” (December 26), compliments to Business Standard for an editorial that was forthright and minced no words! This “rollback” business, which has become a sort of routine with almost all governments, speaks poorly of the preparatory work and analysis done before announcing any rules that affect a large number of people. If the research before announcing a rule is comprehensive, it would factor in the likely outcry and have answers to the same. The Employees’ Provident Fund Organisation (EPFO) trustees have, unfortunately, made it a habit to raise their voice whenever there is even a small reduction of, say, five or 10 basis points in the interest rate. They seem to wear blinkers and refuse to see ground realities. These trustees — many of them trade union leaders and politicians — are well aware that interest rates across the board are going down; as indeed they must if the nation is seeking rapid economic growth and we want to catch up with the industrialised world. They are aware of the 1.5 to 2.5% interest rates of the banks in developed economies — even zero and negative in some cases — and yet, to gain brownie points with their constituency they don’t miss any occasion to cry hoarse whenever the government tries to correct the situation.
In the current scenario, there is absolutely no justification for a tax-free interest rate of 8.65% in case of EPFO and eight% for PPF. Members of the EPFO are not amongst the most poor, and in some cases they are even high salary earners. One has seen that irrespective of salaries people continue to contribute the permissible 12% plus another voluntary 12% to the scheme (specially in private trusts) and with the addition of another 12% by the employer, end up saving huge sums through this instrument and continue to earn high tax-free interest.
The government has identified several direct subsidy schemes for the poorest of the poor and these must of course be strengthened further. The wretched of the nation need lot more help and we have to ensure that the well-off don’t gain from such schemes. The finance minister must bring in the taxation provision for at least all new deposits in the EPFO and PPF schemes, and not roll it back this time. I think your suggestion for “creating a more sustainable savings mechanism for the majority of Indians” makes eminent sense.
Krishan Kalra Gurgaon
