The Hindu Business Line : Ministry ratifies EPF rate of 9.5 pc

THE Finance Ministry has ratified the interest rate of 9.5 per cent for 2002-03 and 2003-04 on the employee provident fund accumulations of about four crore subscribers of the EPF scheme. For 2004-05, the Ministry is awaiting the final recommendation of the Central Board of Ttrustees (CBT).

The CBT had recommended 9.5 per cent interest on EPF deposits for 2002-03. For 2003-04, a composite interest rate of 9.5 per cent (interest at 9 per cent plus a one-time golden jubilee interest of 0.5 per cent) had been recommended.

The ratification of the interest rates for these previous years (2002-03 and 03-04) was important since the recommendations of the CBT are not binding on the Central Government and have to be separately ratified.

"We have ratified the interest rate of 9.5 per cent for 2002-03 and interest of 9 +0.5 per cent for 2003-04. As far as the interest for 2004-05 is concerned, the Finance Ministry is awaiting the final recommendations of the CBT," Mr P. Chidambaram, Union Finance Minister, told reporters here on Friday.

The CBT had in August last year made an interim recommendation of 8.5 per cent interest for 2004-05. This was later raised to 9.5 per cent at the behest of the trade unions.

Ahead of the Assembly elections in Bihar, Jharkhand and Haryana early this year, the Finance Minister had a meeting with the Prime Minister, Dr Manmohan Singh, after which he indicated that the Government was willing to offer a 9.5 per cent interest rate for 2004-05.

But the crucial issue yet to be sorted out is the way in which the anticipated gap of Rs 927 crore would be bridged by the CBT if a 9.5 per cent interest is to be paid for 2004-05. The CBT had estimated a gap of Rs 927 crore between what it earned from investments and the payout that would have to be made if 9.5 per cent interest is allowed for the year. The projected interest income of the EPFO for 2004-05 stood at Rs 5,919.42 crore and the interest payment liability (if 9.5 per cent interest is paid) would stand at Rs 6,846.57 crore. The board is likely to meet early next month to discuss ways to bridge the deficit and to make its final recommendations on the interest rate for 2004-05.

The total corpus of funds managed by the Employee Provident Fund Organisation (EPFO) is currently estimated at about Rs 1,28,000 crore. This includes Rs 71,000 crore of the Employees Provident Fund (EPF), Rs 52,000 crore of Employee Pension Fund and Rs 4,000 crore of the Employee Deposit Linked Insurance (EDLI) scheme.

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