Class enemies

Between a rock and a hard place, the EPFO Central Board of Trustees CBT has chosen the latter. Setting a 9.5 interest rate on PF would hav...

Between a rock and a hard place, the EPFO Central Board of Trustees CBT has chosen the latter. Setting a 9.5 interest rate on PF would have been ludicrous; the CBT8217;s finance and investment committee had recommended 8 per cent, in alignment with the EPFO8217;s 2005-2006 returns. But even an 8.5 per cent rate will wipe out the Special Reserve Fund SRF and still call for additional resources. The SRF is not a treasure chest. It8217;s built on unclaimed PF dues. The assumption must always be that these claims can be made one day, and the SRF should be left untouched. If the SRF is used up, the PF can become a Ponzi scheme: extravagant payouts to a majority of claimants become dependent on some claimants not asking for their dues.

But even Ponzi schemes need money to begin with. Last year the EPFO withdrew Rs 716 crore from the SRF. There8217;s only Rs 144 crore left. To maintain an 8.5 per cent interest, the fund needs another Rs 221 crore. The finance ministry has, rightly, refused help. The labour ministry has said it will make its own arrangement. How? And why? The dirty little secret, at least as far as Left propaganda on PF goes, is that high rates help mainly the rich. The top 15 per cent of the accounts contain 85 per cent of the assets. Higher interest rates do not help everyone equally. The higher the balance in a member8217;s account, the bigger the benefit of jacked up rates. Consider this small calculation: the average PF account balance in Rs 2,938. At a 9.5 per cent rate, annual interest accrual will be Rs 279. At an 8.5 per cent rate, the figure will Rs 249.708212;Rs 29.30 less. Does around Rs 30 less in a year make life unbearable for the working class? So, when Left trade unions say they will continue to demand a 9.5 per cent interest rate, what they mean in effect is that they will continue to fight for the upper middle class, top end corporate types.

At the upper echelons of salaried Indians, joining a PF is a voluntary decision8212;there are nice returns and tax breaks. These people are undoubtedly thrilled that leaders of the working class are working for them. Perhaps the working class leaders are thrilled, too. What else explains such betrayal of class interests?