The Hindu : EPF interest cut neutralised by bonus

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Sunday, Jun 01, 2003

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EPF interest cut neutralised by bonus

By Our Staff Correspondent

Photo: V.Sudershan.

The Labour Minister, Sahib Singh Verma, at a meeting of the Central Board of Trustees of Employees Provident Fund Organisations in New Delhi on Saturday.

NEW DELHI MAY 31. The Centre today decided to retain the 9.5 per cent interest on the Employees Provident Fund (EPF) technically though there has been a reduction of 0.5 per cent in the interest rate that has been compensated by a bonus of 0.5 per cent for the contributors to mark the golden jubilee year of the EPF Organisation. The decision will benefit 30 lakh subscribers.

Announcing this at a press conference after the meeting of the Central Board of Trustees of the EPF Organisation, the Labour Minister and chairperson of the EPFO, Sahib Singh Verma, said the present returns on the subscribers contribution, amounting to Rs. 1,40,000 crores, fetched an income of Rs. 5,844.31 crores by way of 9 per cent interest rate, while the expenditure was Rs. 5,819.23 crores. ``The surplus of Rs. 25.08 crores has been supplemented by funds from the Contingency Fund of Rs. 2,000 crores to compensate for the deficit in the bonus. The contingency fund in the past 5 years has accumulated to Rs. 2,000 crores which acted as a `cushion','' Mr. Verma said adding that a large portion of the money has been retained in the contingency fund.

The Finance and Investment sub-committee, constituted by the EPFO on March 28 to recommend the interest rate, had suggested a cut between 0.5 per cent and one per cent in the rates. ``The decision to retain the interest rate was taken to give maximum benefit to the workers and it was unanimously agreed upon by the trade union representatives and the employees organisations,'' Mr. Verma said. The Labour Ministry was under tremendous pressure from the Finance Ministry to bring down the interest rate by at least one per cent in the wake of prevailing market conditions where interest on small savings had gone down considerably. The slashing of interest rates had affected returns on the Special deposit Scheme where 80 per cent of the EPF contribution is invested.

On the three companies — HMT, IFCI and IDBI — that had defaulted in paying the returns and the principle amount, Mr. Verma said the matter had been taken up with the Finance Minister and ways would be found out to adjust or retrieve the money.

On the change in the pattern of investment, he said the proposal sent by the Central Board of Trustees was not acceptable to the Finance Ministry but would be taken up again. The change seeks to reduce investment in the Public Sector Undertakings and public financial institutions to 30 per cent from 40 per cent.

As of now the public sector bonds were drawing 14-15 per cent interest and power companies were offering over 9 per cent rate on their bonds.

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