Govt shows reality check to unions: EPF hike favours few

Labour Commissioner Ajai Singh said that nearly 85% of their subscribers have deposits between Rs 6,000 to Rs 30,000. Six per cent have Rs 6 lakh and above and most of them are in EPF for tax-saving purposes. Any increase in interest rate to the tune of 1-2% will only benefit these white collar depositors. The section for whom the scheme is made will not really benefit.

‘‘We tried telling them that the beneficiaries will not benefit their constituency,’’ said Singh.

The next meeting of CBT, chaired by labour minister Sis Ram Ola, will be held on July 13 after the Union Budget where the decision is likely to be made. The interest rates announced by the last government for the year 2003-4 for EPF is 9.5 per cent. However, it has not been notified, not just for this year but also for the last financial year, smacking of a political announcement that is never really implemented on the ground.

‘‘I have written a letter to the Finance Ministry asking them to notify this rate for 2003-4,’’ said Ola.

The result is that only those who retired after April 2003 have got the benefit of 9.5%. The rest will have to wait for the notification.

The various stakeholders are locked in a fierce battle over the interest rate. All major trade unions have demanded an increase in interest rate to 12 per cent which translates into Rs 2,000 crore cost for the Ministry. They also want the Finance ministry to issue ratification for the previous year’s EPF rates.

On the other hand, the EPFO’s Finance and investment sub-committee has recommended slashing of interest rates to 8.0 per cent from the present 9.5 per cent. At 9.5%, the deficit is Rs 271 crore. They think these high rates are distorting the interest market and the losses are too much for them to bear. The Government only gets a return of 8% from their investments of the EPF funds.

Prior to today’s meeting, there were expectations that rates could be retained at the present level of 9.5 per cent, taking into consideration the rising inflation and pressure from the Left-affiliated trade unions.Some trade unions like CITU wanted clarity on whether the special deposit scheme where 80 per cent of EPF was invested, would be continued. The fate of SDS would be known only after the budget.