New Delhi : The Finance Ministry defended its decision to pay 8.7 % interest on EPF saying last year’s surplus would have to be used to pay this rate even as the Labour Ministry assured RSS-backed trade union BMS that it would push for 8.8 % rate.
Opposing the lowering of interest rate, as many as 10 central trade unions have decided to hold a day-long protest on Friday against the Finance Ministry’s decision. However, the BMS will not be part of that protest.
A Finance Ministry source said the decision was based on “pure arithmetic calculation” and is aimed at ensuring sustainability of the EPFO and providing “stable returns” to its members in falling interest rate scenario.
Meanwhile, Labour Minister Bandaru Dattatreya met the RSS-backed Bharatiya Mazdoor Sangh (BMS) and assured that his ministry will press for an 8.8 % interest rate and present “all justifications” for it to the Finance Ministry. Earlier in February, the Central Board of Trustees (CBT) of the EPFO had decided to provide 8.8 % interest to its over five crore subscribers for 2015-16, a tad higher than 8.75 provided in previous two fiscals.
Later, the Finance Ministry ratified the interest rate at 8.7 % which sparked strong reaction from the trade unions who termed the decision as an encroachment on the CBT’s territory. “The earning of the EPFO in 2015-16 is not even sufficient to pay 8.7 %.
The ratified interest rate of 8.7 % would leave a surplus of around Rs 1,000 crore with EPFO for the year 2015-16. This is still lower than the surplus of Rs 1,604.05 crore for the year 2014-15,” the source said.
The source said that at the proposed rate of 8.8 % this surplus would be reduced to just Rs 673.85 crore in the year 2015-16.
“Thus the proposed rate of 8.8 % seeks to draw on surplus of last year and this would adversely hit maintenance of relatively stable returns to investors for the next year in a falling interest rate scenario,” the source added.
Explaining the process, the source said interest rate on EPF accumulations is administered by the Labour Ministry on the recommendations of Central Board of Trustees (CBT) of EPF. The Finance Ministry source further said the interest income earned on nine crore inoperative accounts, having a principal of more than Rs 35,000 crore, is not distributed among them but rather distributed among existing active account holders based on a CBT decision.
The development comes against the backdrop of the government withdrawing two proposals pertaining to EPF.
