New Delhi: Given the extent of exposure to virus-infected IL&FS bonds, the Finance Ministry has now asked whether the fund has enough surplus to pay the 8.65 per cent interest rate for 2018-19. With 1,400 top-of-the-line companies, schools, MNCs and PSUs having invested in what were originally ‘triple A’ rated bonds – which later succumbed to the vagaries of a toxic company — the life savings of white and blue collar salaried employees is at peril. In a letter to the Labour and Employment Ministry, the Finance Ministry asked why the surplus after payment of the EPF interest rate for previous years can be seen only in the fund’s ‘estimates’ and not clearly in the ‘actuals’. It has also asked for details about EPFO’s exposure to murky entities. The total exposure to EPF and pension funds is Rs 9,700 crore.
In EPFO accounts for 2016-17, there exists information about ‘income over expenditure’ on a cumulative basis, but it does not provide clear details. In case of a default, the liability to pay to EPFO subscribers would be with the government. That’s
why due diligence of the EPFO accounts is being undertaken. The EPFO’s investment in IL&FS was pegged around Rs 574 crore by Standing Committee on Labour in its report. Firms, which manage the EPF of their employees on their own, had an even higher exposure to IL&FS than the retirement fund body. The committee had warned the Government that this could put workers at a disadvantage.
An EPFO official was cited by a newspaper as saying that ‘all our calculations are correct. We have been doing this exercise for the last 20 years or so. It is not a new methodology we are following. Finance Ministry has some queries and we are responding to these.’’ When asked about the exposure to IL & FS, the EPFO official said they have been asked to explain how they will manage in case they lose the money invested in IL&FS. ‘‘They should not be worried as nothing has happened,’’ the official added.
Both the EPFO and in-house trusts, which have invested in the bonds, are fearing big losses as IL&FS bonds are unsecured debt; these bonds do not carry any government guarantee and all such instruments face market risks. Also, there is the additional danger of some of these entities being declared NPA.
