Coming under pressure from the Left-backed trade unions, the Employees Provident Fund Board on Monday agreed to continue paying 8.5% interest to nearly 4 crore of its subscribers for fiscal 2006-07. The same rate of interest was paid in the previous fiscal.

?Amid protests by some trade union representatives, it has been decided to pay 8.5% interest rate on provident fund,? labour minister Oscar Fernandes said after a three-hour meeting of the EPF Central Board of Trustees on Monday.

But the trade unions won?t budge as they stuck to their demand of 9.5%.

The decision to retain 8.5% interest will create a burden of Rs 450 crore on the EPF fund, but sources said this could be offset with a surplus of Rs 590 crore lying in the interest suspense account and the contingency reserve and special reserve fund.

The board will submit recommendations to the finance ministry, which is expected to notify the rate shortly. Fernandes said the EPF had set up a sub-committee to assess the board?s finances. The report of the committee found that the board would have a surplus of Rs 595 crore. Not just this, even after paying 8.5% interest, the fund will have a surplus of Rs 83 crore. The EPF has a corpus of Rs 94,000 crore, which includes the pension fund.

The total interest outgo for 2006-07 would be Rs 7,800 crore, Fernandes said, adding that the decision pertaining to interest payment for the current fiscal would be decided later.

Referring to the demand of trade unions to pay a higher interest rate, he said the board had set the rate only for the previous year. Since bank rates had gone up mainly this year, the board could consider revising the interest rate for 2007-08 later, he said.

The board also discussed the government?s suggestion to invest 5% of the corpus in the stock market, but no decision was taken.

The EPF Board met half-a-dozen times this year but could not reach a decision because of the pressure from the trade unions. At its last meeting on May 27, the Board had decided to take a fresh look at the matter on July 2. The meeting was later called off.

Fernandes is of the view that for 2006-07, the rate of interest will depend on the fund available with the EPF and the higher rate of interest offered by commercial banks will be taken into account for future calculations.