Even as trade unions stepped up their protest a day after labour minister Bandaru Dattatreya conveyed the finance ministry’s decision to ratify a lower interest rate of 8.7 per cent for EPF subscribers, there appears to be a degree of bureaucratic wrangling on the road ahead. While the new rate for EPF subscribers for 2015-16 has not yet been notified, it is evidently a divided house on what needs to be done next.
“We have asked the CPFC (Central Provident Fund Commissioner) for his comments. His views are awaited before the ratification will be notified by the ministry,” labour secretary Shankar Aggarwal said.
Central Provident Fund Commissioner V P Joy, however, asserted that the fund manager has already communicated its recommendation for interest rate to the EPFO’s Central Board of Trustees (CBT), which had prescribed an 8.8 per cent rate for 2015-16. “Why will EPFO give its views now, we have already communicated our views to CBT. Now, the decision has to be notified by the labour ministry,” Joy told The Indian Express. When asked about the EPFO having already conveyed its views on the matter, Aggarwal replied, “We have asked for their comments now. They are duty bound to reply to what we are asking.”
The labour minister had in February announced “interim” interest rate of 8.8 per cent for 2015-16 for over 4 crore subscribers, lower than CBT’s original recommendation of 8.95 per cent. As per EPFO estimates, a rate of 8.95 per cent will result in savings of Rs 100 crore. As per general practice, the CBT decides the rate and it is approved by finance ministry.
The lower rate ratified by finance ministry is in line with the government’s move last month, when the finance ministry slashed interest rates across a number of savings schemes, including the vastly popular Public Provident Fund, the Kisan Vikas Patra, the National Saving Certificate and the five-year Monthly Income Scheme.
This follows a series of rate cuts by the Reserve Bank of India, which has brought down interest rates by 150 basis points over the last 16 months. The EPFO had offered an 8.75 per cent rate of interest in 2013-14 and 2014-15, which was higher than 8.5 per cent in 2012-13 and 8.25 per cent in 2011-12.
The government has already backtracked on two decisions related to EPF. Earlier, on April 19, under pressure from protesting trade unions, the Centre had cancelled a notification that tightened rules for the withdrawal of Employees’ Provident Fund (EPF) accumulations till the age of 58.
The decision was announced hours after violent protests by workers and labour unions, mainly in Bengaluru, against the curbs on withdrawing employer’s contribution from PF accumulations. This was the second rollback on the revised EPF withdrawal norms announced in this year’s Budget — the government had to earlier scrap its proposal to make 40 per cent of the corpus taxable on withdrawal.