NEW DELHI: Amid differences
between representatives of employees and employers, the EPFO failed to take a
decision today on the interest rate to be paid to its 4.7 crore subscribers for
2011-12 and asked the Finance Ministry to take the final call.
The Employees' Provident Fund
Organisation (EPFO) will forward different suggestions with respect to payment
of interest on provident fund deposits for the current fiscal to the Finance
Ministry for a final decision, Labour Minister Mallikarjun Kharge said after a
meeting of the Central Board of Trustees (CBT), the highest policymaking body
of the EPFO.
While the EPFO has suggested
payment of interest at the rate of 8.25 per cent for the fiscal, the trade
union members insisted that it should be 9.5 per cent. The representatives of
employers wanted the interest rate to be fixed at 8.5 per cent. The EPFO paid
9.5 per cent interest to its members during 2010-11.
According to sources, this was
the first time that the CBT has failed to take a call on the interest rate and
has asked the Finance Ministry to decide the issue.
Making a case for payment of 9.5
per cent interest, the trade union members, according to sources, argued that
the EPFO cannot pay less than 8.6 per cent interest, the rate offered by the
government under the Public Provident Fund (PPF) scheme. The Financial Advisory
Committee (FIC) of the EPFO, however, had suggested payment of 8.25 per cent
interest in 2011-12.
According to estimates worked out
by the EPFO, the payment of 8.25 per cent interest during 2011-12 would result
in a deficit of a mere Rs 24 lakh vis-a-vis its earnings.
It had further pointed out that
an 8.5 per cent rate of return for subscribers would translate into a deficit
of Rs 526.44 crore.
The trade unionists were of the
view that if the estimation error is factored in properly, the EPFO could spare
around Rs 400 crore, which would be sufficient to pay an additional 0.25 per
cent over the projected 8.25 per cent rate of return this fiscal.
The unionists also raised the
possibility of passing on the interest income on inoperative accounts, on which
the EPFO stopped payment of interest from April 1, 2011, to active subscribers.
Inoperative accounts are those
accounts that have not received any contribution for 36 months or more. About
Rs 15,000 crore lying in these accounts has been invested and is yielding
returns, it was pointed out.
The EPFO, however, was not clear
whether the income from these inoperative accounts could be distributed among
live accounts, or should be kept as reserves.
