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The Union Minister for Labour and Employment and Chairman, EPF Central Board of Trustees, Mr K. Chandrasekhar Rao (left), and the Vice-Chairman, Mr A.M. Sahni, at a special meeting of the CBT in New Delhi on Saturday. - S. Subramanium

New Delhi , May 28

THE Central Board of Trustees (CBT) of the Employees' Provident Fund Organisation (EPFO) on Saturday recommended 9.5 per cent final interest rate payable on provident fund accumulations for fiscal 2004-05. The final rate is one percentage point more than the interim rate of 8.5 per cent recommended by the board in August 2004.

After a five-hour-long meeting of the CBT, the Labour Minister, Mr K. Chandrasekhar Rao, who is also the Chairman of the board, told presspersons that the organisation would have to dip into its Special Reserve Fund (SRF) to pay interest for fiscal 2004-05. "The deficit of Rs 716 crore will be met from the special reserve fund of the EPF," Mr Rao said.

This is the second time that the organisation would be dipping into its reserves for paying interest to its subscribers. During fiscal 2003-04 also, the EPFO had to draw from its reserves to pay an additional 0.5 percentage point golden jubilee bonus over and above the CBT recommendation of 9 per cent to retain the final rate at 9.5 per cent.

The Special Reserves are funds forfeited and parked in the banks over decades and have earned over Rs 600 crore in interest. The SRF now has a total balance of Rs 942 crore. This fund is used to meet the employers' obligation in cases where the employees' contribution to the provident fund has been deposited with the EPFO but the employer failed to deposit his contribution.

In such cases, when the EPFO, after making due efforts, is unable to recover the amount from the employer, the employers' obligation is met from the SRF.

The EPFO's interest earnings for fiscal 2004-05 falls short by around Rs 716 crore compared to its interest liabilities for the year if it has to credit 9.5 per cent on provident fund accumulations of its four crore subscribers.

The board also decided to request the Government to increase the rate of interest on Special Deposit Scheme (SDS) where the major chunk of EPFO funds are parked.

Pressed by the trade union leaders, the board also decided to again request the Union Government to provide Budgetary support to the EPFO so that it does not have to dip into its reserves.

The Secretary of the Centre for Centre for Indian Trade Unions (CITU), Mr W.R. Wardharajan, who is also a CBT member, said that the Finance Ministry should have ideally provided the funds to make up the deficit. "Withdrawal from the reserve fund is like consuming grain reserved for sowing," he said.

The labour leaders, except the INTUC, today submitted a communiqué to the Labour Minister during the meeting, reminding him that the Government had issued a release in February 2005, which stated that "the Government has decided to give interest rate at 9.5 per cent on the deposits of the EPF subscribers for 2002-03, 2003-04 and 2004-05."

The CBT member and President of the Indian National trade Union Congress (INTUC), Mr Sanjeva Reddy, told Business Line that, "The Government would be requested to provide Budgetary support so that the reserves are not affected. But the workers may also take note that in 2005-06 the rate of interest may not be more than eight per cent."

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