New Delhi, May 13: Two major trade unions, the Bharatiya Mazdoor Sangh and the Indian National Trade Union Congress, appear willing to renegotiate a new provident fund interest rate with the Centre as they believe a slash in the present rate of 9.5 per cent is inevitable.
The finance ministry has recommended a reduction of the rate from 9.5 to 8 per cent.
BMS and Intuc members on the finance and investment committee, recently set up to thrash out the interest rate impasse, has issued instructions not to credit interest at 9.5 per cent from April.
An Employees Provident Fund circular of April 24 says: “Pending a decision on the interest rate, the finance and investment committee has decided not to credit interest at 9.5 per cent to subscribers from April 2003.”
BMS secretary A.. Dogra said: “We want the Central government to subsidise the deficit if there is a slash in the interest rate, which now seems inevitable.”
The Centre of Indian Trade Unions and the All India Trade Union Congress, kept out of the newly constituted Central Board of Provident Fund, said the proposal of a Central subsidy is far from feasible.
Central subsidy essentially means pumping extra money out of the Centre’s corpus of Special Deposit Fund (SDF).
“From April this year, the government has reduced the interest rate on SDF from 9 per cent to 8 per cent. The finance ministry has recommended closing the SDF and channelising its remaining balance to Central government bonds,” Citu secretary W.R. Warda Rajan said.
“The refund coupon rate of the Central bonds at present stands between 6 and 6.5 per cent, which means they will not be able to subsidise the gap in the provident fund interest rate,” he said.
The BMS argued that eventually it will not be possible either for the labour ministry or the Employees Provident Fund to stall a reduction in the interest rate even though labour minister Sahib Singh Verma has publicly gone on record, more than once, that his ministry will not accept a rate slash.
Signals emanating from the Prime Minister’s Office are not encouraging either. “The finance and investment committee sought a meeting with the Prime Minister, but he seems to be too busy with political affairs. We still have not managed to discuss the issue with him,” Dogra said.
Referring to the finance and investment committee’s decision to freeze the interest rate from April, Warda Rajan said: “The committee has no jurisdiction to recommend such a freeze. Such a move clearly signifies that these trade unions, BMS and Intuc, even though in principle opposed to any reduction in the interest rate, are now viewing it as an inevitability.”