New Delhi: The Employees Provident Fund (EPF) may not fetch returns at 8.6% this fiscal year, labour minister Mallikarjun Kharge said Tuesday, retracting an announcement he made in Parliament last week.
There is no certainty that the EPF interest rate will increase to 8.6% from 8.25%, he told reporters at an event marking International Labour Day. “I did not say that it will increase to 8.6% in the Rajya Sabha. It was misconstrued,” Kharge said. “The interest rate will depend on the earnings from the EPF corpus. It’s not fixed.”
EPF has a corpus of more than Rs 3 trillion and at least 50 million subscribers.
Labour ministry officials said the Central Board of Trustees (CBT), the apex decision-making body of the EPF Organization (EPFO), is yet to take a decision on the interest rate. CBT comprises labour ministry officials, employer representatives and labour unions.
Asked why the ministry cannot fix the EPF interest rate at the beginning of a financial year, Kharge noted that he had been caught off-guard a couple of years ago when he declared a higher interest rate of 9.5% for 2010-11 and the finance ministry opposed the plan.
And last year, the social security scheme reduced its payout after the “finance ministry saw the accounts and allowed us to give 8.25% interest,” the minister explained.
Tapan Sen, general secretary of the Centre of Indian Trade Unions, said that when the government has hiked the interest rates for the Public Provident Fund and the government provident fund to 8.6%, it was unfair to keep the EPF rate below that level.
“Even interest on the special deposit schemes (SDS), where EPF invests a portion of the fund, has been increased to 8.6% in December 2011. It’s difficult to understand why EPF will earn less than that,” said Sen, a Rajya Sabha member.
Press Trust of India (PTI) cited Kharge as saying in the Rajya Sabha last week that the EPF rate had been lowered in the previous year because of lower income from its investment in SDS. “There is no question of minimum or maximum interest rates. We distribute it as per our revenue. Next time, it will be 8.6%,” Kharge said, according to PTI report.
The EPF commission has invested more than Rs 50,000 crore in SDS, a government scheme that typically earns a little more than the normal deposit schemes.
Babulal B. Todi, an employers’ representative in CBT, said that unless a proposal comes up for discussion in the board meeting, a decision cannot be taken. “For the 2012-13 fiscal, CBT is yet to meet and there is no proposal on interest rate so far,” said Todi, a director of Todi Industries Pvt. Ltd in Maharashtra.
Separately, Kharge introduced a scheme that will allow both employers and employees to get EPF statements every month soon after the money is deducted from their salaries and deposited in accounts. “The hassles of preparing various paper returns and visiting EPF offices for submitting them have now become things of past with this new electronic challan-cum-return,” said R.C. Mishra, central provident fund commissioner. “This will reduce the work load on EPF officials by 40-45% and this saving in manpower will help improve efficiency. Besides, the stoppage of the manual transfer of funds will save the organization some Rs 12 crore every year.”
Employers can benefit from the scheme from 1 May and employees can get monthly EPF statements from the EPFO website in a couple of months, said B.K. Panda, additional central provident fund commissioner.