No consensus on EPF rate

Even as the financial year is coming to a close, the Board of Trustees of the Employees’ Provident Fund Organisation (EPFO) failed yet again today to arrive at a decision on the interest rate and reiterated its earlier stand against investing 5 per cent of the EPF money in stock markets. Minister of State for Labour and Employment Oscar Fernandes said after the meeting that “though the rate of interest was on top of today’s agenda, a decision on it was postponed till the next meeting.” The delay in the PF rate decision that is meant to be announced at the beginning of a fiscal year, for the third year in a row, will hurt employees who quit their jobs during the year.

Indicating the government’s confusion on cutting the EPF rate to 8 per cent in line with the fund’s earnings at a time when four state elections are round the corner, while repeating his earlier statements that ‘the rate of interest will depend on how much money we have in our coffers,’ Fernandes also hinted that he would try to have a fresh round of talks with Finance Minister P Chidambaram over the issue before the board’s next meeting scheduled in early March. While Chidambaram is clearly against the idea of subsidising an 8.5 per cent EPF rate when the government provident fund rate is 8 per cent, Fernandes would make another attempt to seek the additional funds of Rs 441 crore required to retain last year’s PF rate from the Finance Ministry. Prime Minister Manmohan Singh and Chidambaram had earlier advised Fernandes to convince the Board to clear the equity investment proposal before talking about the interest rate. To counter objections from board members, Fernandes was advised to tell the Board, “You want a higher interest rate on the PF, but when it comes to making investments, you block any proposals that can help earn higher returns.” Both the FM and PM had also made it clear that the rate should not be more than what the EPFO can afford and should be pegged at eight per cent as per this year’s income.

But Fernandes hasn’t been able to do the same as even EPFO’s investment manager and banker State Bank of India had told the EPF Board’s Finance and Investment Committee that EPFO’s current administrative, accounting and treasury set-up wouldn’t be able to cope with stock market mechanisms such as marking investments to market at the end of a fiscal year.