Under attack from various quarters for “overcharging” the subscribers, the Emplyeees Provident Fund Organisation (EPFO) intends to prune administration charges to 0.5% from 0.85%. However, Employees State Insurance Corporation (ESIC) won’t bring down the contribution of employees nor employers as it strives to create better infrastructure aimed at offering better services to its insured persons (IPs).

The retirement fund body, EPFO had brought down the administrative charges to 0.85% with effect from January 1, 2015 from 1.10% it used to levy for 16 years starting August 1998. ESIC, on the other hand, has been charging its stakeholders the same way for long. With higher income  and less expenditure, the two had amassed over Rs 7,800 crore in 2014 — Rs 5,420 crore for ESIC and Rs 2,406 crore for EPFO.

EPFO’s excess income over expenditure for 2014-15 went  up to Rs 3,138 crore, according to its latest annual report; however, ESIC is yet to come out with the numbers. Sources said, ESIC’s excess income might go up to Rs 6,500 crore for the 2014-15 financial year.

While chief provident fund commissioner K K Jalan admitted that the charges should be lowered and a discussion has already taken place in a Central Board of Trustees’ (CBT) meeting before the proposal sent to the finance ministry, ESIC’s director general Deepak Kumar said in comparison to an average of Rs 5,500 collected from each IPs in a year, the average spent on them is Rs 2,900 now.

“Savings is the result of our mediocre services. The expenditure on helath benefits has always been a matter of concern for us. We need to spend more on health benefits in proportion to the income from employers and employees. We are ramping up infrastructure with the accumulated sum so that we can provide better services to our IPs. If we prune the rate of contribution, we will have no option but to continue with the existing kind of services,” Kumar said

Rajesh K Moorti, partner, Aarian Capitals, however, feels that by overcharging, both EPFO and ESIC are squeezing money from business and profiteering. There is a scope for regional provident fund officer (RPFO) to reduce administration charges by at least 25-30 basis points, while a minimum of 40% reduction in the contribution of both the employers and employees towards ESIC.

In case of EPFO, CBT recommends the rates for administration and inspection charges. However, it is fixed by the central government and notified in the gazette. The rate of contribution for the ESIC is also decided by the labour ministry following consultation in a tripartite body constituting of centre and state governments, labour unions and employers’ body.