Barbs are likely to fly thick and fast as the Central Board of Trustees (CBT) of the Employees’ Provident Fund Organisation (EPFO) meets on Monday to decide on the interest rate to be provided for 2016-17 on provident fund accumulations for the retirement fund body’s more than 4 crore subscribers.
Sources said while the government will express its inability to sustain the 8.8% rate of interest provided on accumulations for 2015-16; trade union representatives, cutting across party lines, are expected to raise strong objections to scuttle any such attempt and insist on at least retaining the rate, if raising is not possible.
Labour ministry sources said maintaining the rate was not possible given the fact that the retirement fund body was left with just R409-crore surplus after providing 8.8% returns for 2015-16, compared with R1,640 crore a year earlier. They also said retaining the rate is not tenable in this current lower interest rate regime.
“Interest rate for the General Provident Fund (GPF) has been brought down to 8% for the October-December quarter of the current fiscal compared with 8.7% a year earlier. Even as there was a need to prune the rate, the EPFO eventually provided for 8.8% interest rate last fiscal. It is simply not possible at this juncture,” a source said.
The CBT, headed by the labour minister, is the highest decision-making body of the EPFO. It has representatives from the government, industry and trade unions. While the CBT takes the call, the finance ministry ratifies the rate.
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However, even as the CBT had approved 8.8% rate last fiscal, the finance ministry decided to lower interest on EPF to 8.7%. However, the North Block had to roll back the decision and provide for 8.8% on EPF deposits for 2015-16.
RSS-affiliated Bhartiya Mazdoor Sangh’s general secretary Brijesh Upadhyay said, “There would be huge protests if the rate is not at least maintained. Since the finance ministry does not pay a single penny for providing the rates, it should not have any say.” AITUC national secretary DL Sachdeva echoed the same view. CITU president AK Padmanabhan said there would be “big resistance” if the interest rate for 2016-17 is not retained.
Sources said as per the EPFO income projections of Rs 39,084 crore for the current fiscal, providing 8.8% rate of interest will leave a deficit of Rs 383 crore. There would be a surplus of about Rs 69.34 crore if interest rate is lowered to 8.7%.
They said the finance ministry has asked the labour ministry to align the EPF interest rate with other small saving schemes of the government such the Public Provident Fund (PPF). In September, the government reduced interest rates on small savings schemes by 0.1% for the October-December quarter of 2016-17, which resulted in lower returns on the PPF, Kisan Vikas Patra and Sukanya Samriddhi Account, among others.