After Oscar Fernandes took over as the labour minister, many pending issues were put on fast track. The UPA top brass also wanted to announce some of the labour welfare measures before the Lok Sabha election.
The proposal for minimum pension will be put before the Cabinet soon," an official familiar with the development told FE. The EPFO will soon notify a hike in the basic wage to Rs 15,000 to be compulsorily covered under the EPFO," the official said.
At present, employer contributes 8.33% of the basic wages towards EPS, and the government contributes just 1.16%. The proposal is to raise the governments contribution to 1.79% and hike the minimum mandated basic salary to come under EPF to Rs 15,000 per month from the present Rs 6,500. Both the moves are expected to help cut the EPS deficit and enable it to offer a minimum pension of Rs 1,000 a month.
Although the finance ministry was against raising the minimum pension to Rs 1,000 per month as it would entail an extra fiscal burden of Rs 1,100 crore annually, the UPA top brass has now accepted the idea.
The finance ministry had told EPFO earlier to find its own resources as the extra fiscal burden for ensuring a Rs 1,000-minimum monthly pension would be Rs 1,100 crore over and above the R1,400 crore it paid in 2012-13. Budget provisions will anyway increase to around Rs 1,400-1,500 crore by 2018-19.
The labour ministry had also pointed out that additional burden for Rs 1,000 monthly minimum pension under EPS is much less than Rs 7,000 crore annual additional burden on the exchequer for increasing pension (including old age pension) under the the National Social Assistance Programme.