EPF decision will have to wait, PC says no to bailout

Ola caught P Chidambaram listening to the budget debate in Parliament. But within two minutes, his hopes were dashed. When he came out, he said he had asked the Finance Minister for a Rs 400 crore bailout package. ‘‘Chidambaram expressed his helplessness and said that I should try to meet the Prime Minister on this issue,’’ said Ola.

As reported by this newspaper, EPFO cannot pay its members more than it earns. If it tries to stick with the current rate of 9.5 per cent, it is staring at a deficit of Rs 927 crore. With its current state of finances, it can pay just over 8 per cent—something that the unions are not willing to accept.

The bailout package was aimed at proposing a compromise, somewhere between 8 and 9 per cent.

Three attempts to propose an acceptable rate had already failed before Ola’s appeal to Chidambaram. Dejected, he went back to the EPF board meeting and announced that the decision would be put off till yet another meeting on August 9.

Having failed to reach a collective decision, the Minister tried to find an acceptable solution through individual meetings with the trade unions, employers and state government representatives.

‘‘At the individual meetings, I took views of all the partners, and they have authorised me to take the final decision,’’ said Ola.

He tried to put on a brave face and said that he had arrived at a ‘‘consensus’’. This claim was promptly dismissed by BMS president Hasubhai Dave, who said that a unanimous decision was not possible and, at best, only a majority decision could be taken.

The trustees could not arrive at a decision on the interest rate in earlier meetings held on June 30 and July 13 and it now appears that their differences have only widened. The government has put on the table a proposal for lowering the interest payout to 8 per cent. Only the Congress-affiliated INTUC seems to be in rough agreement with this, as it is willing to settle for 8.25 per cent.

AITUC is asking for a floor rate of 9.5 per cent while BMS is pitching for 12 per cent. HMS is seeking something similar though it might settle for a more reasonable rate.

Meanwhile CITU, which had earlier sought 12 per cent, raised the bar even further by saying that the payout should be calculated on a ‘‘real rate of return’’ which would mean adding the GDP growth to the interest rate. This year, that figure could touch 14 per cent as the GDP growth has exceeded 8 per cent while inflation is touching 6 per cent.

‘‘After all, it is social security funds kept with the Government meant for the people to access in times of need, the rate of interest should be decided by the lender not by the borrower,’’ said W B Vardarajen, secretary, CITU.

While paragraph 60(4) of the EPF scheme bars a bigger payout than what EPFO earns during the year, even INTUC’s moderate demand of 8.25 per cent would leave an unfunded gap of Rs 26 crore between the interest earned and spent by the EPFO. Union representatives have not managed to meet the Prime Minister or the Finance Minister to press their demands. A peeved Varadarajan said if the Finance minister could meet brokers and consider a rollback on turnover tax, why couldn’t he review the interest rate on small savings and special deposit schemes?

Meanwhile, Ola has around three weeks to forge a ‘‘consensus’’.