Fund managers list didn’t have finmin nod

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New Delhi, Aug19: be decided with the approval of the chairman, CBT, EPF.” Board members say there was no decision to this effect. In fact, while briefing the press after the meeting, labour ministry officials had said that a meeting of the FIC would be convened soon to arrive at the allocation formula.

Speaking to FE, EPFO Board member and Citu secretary W R Varadarajan said, “I take strong exception to the decision recorded in the draft minutes that ‘the proportion for allocation of funds among the fund managers would be decided with the approval of the chairman, CBT, EPF’. In my view this should be decided only by the CBT, on the recommendation of the FIC, taking into account the extant practice obtaining in the Central Government, as indicated during the meeting of the CBT.”

Citu and other trade unions have called a nationwide strike on Wednesday to protest against the UPA government’s policies and the appointment of private fund managers is one of their key planks for the stir.

Incidentally, the finance ministry’s concerns weren’t limited to the mechanism for allocating funds, but also key elements of the bidding process used to short list fund managers.

With regard to the disqualification of Birla Sun Life AMC and HDFC AMC for their ‘zero’ financial bids, the finance ministry’s representative on the board, joint secretary K P Krishnan, had observed that ‘there should be no ambiguity in the original documents that the entities have been prohibited to quote zero cost.’ Otherwise, the post-bid elimination of such AMCs may fall on legal grounds, the Board was warned. A senior official involved in the process admits that the initial bid documents didn’t include any such clause ruling out zero bids.

As far as the allocation of funds to the three managers (the fourth manager Reliance Capital wasn’t in the picture at this juncture of the meeting) was concerned, one idea under consideration was to split the three schemes operated by the EPFO among them. Apart from the Employees’ Provident Fund, the EPFO runs the Employees’ Pension Scheme (EPS) 1995 and an Employees’ Deposit Linked Insurance (EDLI) scheme and it was mooted that the lowest bidder can get the largest corpus (of EPF), the second lowest bidder would get the EPS money leaving the third manager with the EDLI corpus.