Sources told FE that the government is very keen to introduce the NPS for the unorganised sector as well and has been examining the legality of implementing it without a Parliamentary approval. Finance minister P Chidambaram recently held a meeting with ministry officials to discus the PFRDA issue.
If the move goes through, self-employed professionals and people in the unorganised sector, including those employed with private companies would be allowed to come under the contributory pension scheme. This means organised sector workers contractually trapped in the archaic Employees Provident Fund Organisations net, can top up their old-age contributions to EPFO with investments in the NPS. Alternatively, they could renegotiate their terms of employment with the employer and scurry out of the EPF net altogether.
We have examined the issue and found that legally it is possible to start the scheme without waiting for Parliamentary approval, an official said, while pointing out that its effectiveness is however, debatable.
A PFRDA official pointed out that technically, a private individual can already begin investing with any of the three fund managers, but he or she would not come under the regulatory coverage of
To ensure its effectiveness, the finance ministry is now trying to come up with a workable model. Sources said the structure is expected to be similar to the NPS available for government employees. The PFRDA will sign contracts with the existing fund managersState Bank of India, Life Insurance Corporation and UTI-MF, who would invest the funds for the unorganised sector as well. The finance ministry contends that in such a situation relatively few contractual and regulatory issues would arise, as the three fund managers are public sector organisations.
The government has already operationalised the NPS for central government employees who began service on or after January 1, 2004. At least 19 state governments have agreed to join the system, though they are yet to plug into the architecture already in place.
The PFRDA Bill, which will set the rules for pension funds operations in the country, is pending in Parliament but with the Left parties out of the way, it is expected to be pushed through in the UPAs pending tenure.
The central record-keeping agency for the NPS, the National Securities Depository Limited (NSDL), has already completed a test run of its systems a month back. The contributions of central government employees into the NPS since January 1, 2004, have already been transferred to the three fund managers in April this year.
The only hitch in making the NPS fully operational for government employees is that the Controller General of Accounts is yet to finalise their contribution data till date and transfer it to NSDL. It was expected to do it by June 2008, but has recently sought a few more months time from the government.
The interim regulator has also appointed its banker Bank of India and it has ensured there is no conflict of interest between the banker and fund managers roles by keeping State Bank of India out of the bidding process to pick a bank. An independent board under the chairmanship of former Rajya Sabha Secretary General Yogendra Narain has also been appointed to oversee the fund managers and record-keeping agencys functioning. The board has already met twice so far.