The Rs 1,500-crore Defaulting Employer Guarantee Scheme

Perhaps, the EPFO should attach the company8217;s property, he suggested somewhat helplessly.

Last month, Ola showed Central Provident Fund Commissioner Ajai Singh the door for suggesting that India8217;s pension and PF system was in need of urgent surgery. Since then, to prove that the system is in good shape, Ola has hinted that EPFO may pay a higher interest rate to provident fund members than the 8.5 per cent that has been proposed. For this, he hopes to mop up the arrears that defaulters like HEC owe EPFO.

When EPFO last sat down to do its sums, it calculated that errant employers had defaulted on paying a total of at least Rs 1,511 crore towards their employees8217; PF. Of this, in 2003, PSUs alone owed Rs 608 crore.

Considering that when these sums were done, HEC8217;s default had been calculated at just Rs 20 crore, that amount has grown.

Contrary to the minister8217;s stand, the EPFO does not pretend that it will be able to recover most of this money. Of the Rs 1,511 crore it is owed, it has worked out that it may never be able to lay its hands on Rs 1,180 crore as the offending units have either been declared sick, or gone into liquidation or taken the dispute to court, where it will drag on.

So, far from collecting old dues, the EPFO has been fighting to merely stem further leakages. If anything, the figure has mounted by the month. The total default was Rs 1,184 crore in 2001-02. One year later, it had climbed to Rs 1,236 crore before crossing the Rs 1,500-mark in 2003.

To put this amount in perspective, EPFO collected some Rs 11,400 crore as contributions that year. So, on the face of it, the defaults could severely hurt the system, if not cripple it.

But there is more bad news. These numbers were originally based on reports sent by EPFO8217;s network of inspectors across the country, who had territorial jurisdiction. In 2001, EPFO decided to go behind the back of these inspectors to see whether their reports reflected the situation on the ground.

It found that of the 1.8 lakh units under its charge, nearly 56 per cent were not complying with PF payment regulations. Far from making contributions on behalf of their employees, many of these establishments had not even opened EPF accounts for their workers. EPFO did not even know of these lapses because its own inspectors8212;either because of inefficiency or because they were on the take8212;did not inform the headquarters.

Since then, EPFO has scrambled to update its database.

Given another year, its Reinventing EPF India project8212;the same one that Ajai Singh was fighting for when he was eased out8212;would have calibrated the extent of the rot and acted against more defaulters. Already, 1.14 lakh units are now listed as 8220;complying8221; as EPFO abandons its policy of getting entangled in courts8212;60,000 old cases are still pending8212;and starts acting tough by attaching properties of the defaulters.

The tough approach worked in the case of the Madhya Pradesh State Road Transport Corporation which had defaulted to the tune of nearly Rs 100 crore. The PF commissioner responded by attaching its properties 8212; worth Rs 30 crore8212;in Raipur, Bilaspur and Ambikapur and freezing some government accounts, said Trilok Chand, regional PF commissioner, Raipur.

It may not be that easy to get other defaulters to pay up.

8226; Jute mills in West Bengal owe nearly Rs 300 crore between them, says Mahendra Raju, regional PF commissioner, West Bengal. Of this, National Jute Mills Corporation, a central PSU, alone owes Rs 125 crore. Given the employment that this sick industry provides, the government finds it8217;s difficult to either act against it, or recover the arrears. Said Mohammed Amin, West Bengal labour minister: 8220;The private jute mill owners threaten to close their units whenever we put pressure to realise the PF arrears.8221;

8226; The Bihar Rajya Sahkari Bhumi Vikas Bank owes Rs 24 crore. But when contacted, all its top officials claimed they were not aware of the details.

8226; HMT, once a respected name, has not kept time. According to EPFO8217;s list HMT Watch Factory owes Rs 32 crore while HMT Machine Tools and its corporate office have also run up huge arrears. Said an HMT Watches spokesman: 8220;We are looking at our options.8221;

8226; The Rajasthan Awas Vikas Sansthan is already in liquidation and has filed an appeal on the issue of PF arrears. 8216;8216;Since the matter is sub judice, we cannot comment,8217;8217; said the official in question. With each such leakage from the PF kitty, the problem grows.

8212; With bureau reports