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Journalism of Courage
In a move that will assuage the Left’s unhappiness over the recent decision to disinvest 10 per cent equity in Bhel, the Central Board of Trustees of the Employees Provident Fund Organisation (EPFO) ratified the 9.5 per cent interest rate for 2004-05.
Since 80 per cent of the EPF funds are parked in special deposit schemes that give a return of 7-8 per cent, the 9.5 per cent return will leave a shortfall of Rs 716 crore, down from an earlier estimate of Rs 930 crore.
As the finance ministry has ruled out any bailout, the EPFO will meet this shortfall from the special reserve fund (amounts forfeited and parked in banks over decades), which presently stands at around Rs 950 crore.
Though Labour Minister K. Chandrasekhar Rao said the SRF is around Rs 950 crore, according to sources in the EPFO, as on March 31, 2004 the fund had a corpus to the tune of Rs 874 crore. It appears the minister has added the amount expected to be picked up in 2004-05. According to Rao, even after dipping into the special reserve fund, there will be a surplus. However, EPFO sources said there will be little surplus left and the rate of 9.5 per cent cannot be sustained in 2005-06.
Even the reserve, which is the only legal kitty to dip into to meet shortfalls, will be gone, sources added, while adding that the Board did not take up the issue of interest rates for 2005-06 though it was expected to be taken up.
Though Left leaders hailed the move to keep the interest rate at 9.5 per cent, in the meet, trade unions opposed the move to dip into special reserves, which was meant to deal with fluctuations in the interest rates in the economy.
This is the second time in the history of EPFO that it has to bank on reserves for a bailout. The first was when the NDA government granted 0.5 per cent golden jubilee bonus over 9.0 per cent interest to its subscribers in 2003-04.
Rao said after FM P. Chidambaram announced a 9.5 per cent EPF rate, on behalf of PM Manmohan Singh this Feb. this year, the trustees began exploring measures to offset the deficit, as it was comfortable only at paying 8.5 per cent, which it had declared as “interim” return at one of its previous meets last year.
