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You can’t have high reward without risk: Oscar Fernandes

You can’t have high reward without risk: Oscar Fernandes
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First Published: Mon, Jul 23 2007. 11 51 AM IST
Updated: Mon, Jul 23 2007. 11 51 AM IST
Minister of state for labour and employment (independent charge) Oscar Fernandes is among the best placed in the United Progressive Alliance government to ensure that the benefits of the 9%-plus gross domestic product growth are distributed equitably.
Perhaps inevitably, though, due to the nature of his charge, this senior Congress party leader from Karnataka faces greater pressure from the Left parties (which lend outside support to the government) than most of his colleagues. Whether it be the matter of fixing the rate of return on the employees’ provident fund, or the proposed legislation for providing social security to workers in the unorganized sector, Fernandes scarcely seems to be able to take any step towards fulfilling the Congress’ promise of the welfare of aam aadmi (ordinary citizen) without making several false starts and colliding with his allies in the Left parties.
In an interview with Mint, Fernandes said there is no risk in investing provident fund money in the right kind of securities. Edited excerpts:
The central board of trustees of the Employees’ Provident Fund Organization (EPFO) is scheduled to meet again on 23 July. Can we finally expect a decision on the rate of interest to be paid to nearly 40 million subscribers?
It’s up to the board to take a decision. But I’m hopeful. This time, we will discuss the report submitted by the sub-committee appointed about a month ago?to?study the EPFO finances.
Has this sub-committee recommended a rate of interest?
I am not at liberty to discuss the report itself. I can say that the report has been submitted to the board and now, the board can arrive at a decision.
Will you press for retaining the 8.5% rate? And can we expect a uniform rate for 2006-07 and 2007-08?
The rate of interest is something that the board has to decide collectively. Again, while the board can choose to decide the rate for two years, the rate for the current year is not due for a decision just yet. So the board might just decide for one year, that is 2006-07.
The EPFO is reluctant to pay even 8.5% interest because it earns less than that on its investments. This is at a time when depositors can earn at least 9.5% interest from term deposits for a year.
Please remember that the interest rates on deposits were only falling for a long time. So you should consider the rate of interest that people have earned on their provident fund from the time they started investing in it. You can’t take the cut-off date from the time when the rates in the banks rose higher than that paid by the EPFO. Also, here are firms which promise interest rates of even 35%, but you get that kind of interest only for a year or two. And thereafter, you may not get even your principal back. So you can’t have high reward without any risk.
Don’t you personally believe the EPFO should deploy its corpus in more efficient investments, so as to pay more competitive returns?
Well, you know the government has offered the option of investing 5% of the EPFO corpus in the stock markets. It’s only 5% because we don’t want to take any risk with workers’ money. But I personally feel (that) today there is no risk in the right securities; in the navratna firms, for example. So I feel this can be raised from the proposed 5% of the EPFO corpus.
Are you hopeful of being able to push this reform through?
Let me put it this way: I am not a pessimist on this.
Pushing it through would require the consent of the Left parties, or the unions backed by the Left. Don’t you feel constrained by their relentless opposition?
I don’t feel any opposition. They know how the system functions and I have never faced any problem within the board meetings. They may make statements outside, but they know the reality.
Do you mean the statements of the Left-backed unions, like their earlier demand of retaining the EPF rate at 9.5%, were just for public consumption?
I wouldn’t know that, but I have never faced any opposition. They know the ins and outs of the EPFO and they are realistic within the board meetings.
Even so, the government hasn’t been able to move faster on labour reforms. Aren’t the Left parties opposing the proposed legislation to provide social security to the unorganized sector workers?
We are planning to introduce the Unorganized Sector Workers Social Security Bill, 2007, in the monsoon session of Parliament. It’s true that the Left parties have asked for certain changes in the Bill. But the only point of contention is that they are asking for changes even before the Bill is introduced in Parliament, while we felt these could have been incorporated later.
Can we expect changes in the draft as desired by the Left parties?
We know what is to be done. We have all the material we need. We don’t need outside inputs on this. Issues pertaining to labour are not their (Left parties’) exclusive domain. There is such an impression perhaps because they keep talking about it. I don’t talk. I prefer to do. That’s my job.
In other words, would you say you are satisfied with your performance? What would you count as your biggest achievement?
I wouldn’t call it my achievement. I would say it is the ministry’s (achievement). And it is the work we are doing to spread awareness about the ban on child labour. Besides that, there is a huge exercise for skill upgradation across the country. We are going to upgrade 100 industrial training institutes every year. Two hundred thousand youths will be imparted job-oriented skills every year.
The minister for panchayati raj, Mani Shankar Aiyar, has publicly chided the government for doing little for the aam aadmi. As someone who heads a ministry handling affairs directly related to the aam aadmi,?do you agree with the view?
That’s a matter of perception, or really feeling that more could have been done. Take the legislation for providing social security cover to the unorganized sector workers, who form 93% of our workforce. Or take the Sarva Shiksha Abhiyan (an “education for all” initiative). Or, for that matter, the National Rural Employment Guarantee Act. All these are aimed at the aam aadmi. As, of course, is the enhanced allocation for education and health. So I believe our government is focused on the aam aadmi.
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First Published: Mon, Jul 23 2007. 11 51 AM IST