New Delhi, Dec. 7: The employees provident fund interest rate has been brought down by 1 percentage point to 8.5 per cent for this financial year, triggering howls of protest from trade unions.
“It is a unilateral decision. We will fight to have the 9.5 per cent rate restored,” CPI leader and Aituc chief Gurudas Dasgupta said.
However, Prime Minister Manmohan Singh is learnt to have told Dasgupta during a meeting last week that the government is in no position to help the board maintain the interest rate at 9.5 per cent.
Had the EPF board continued to pay 9.5 per cent without government aid, the fund would have gone bankrupt. Even at the lowered 8.5 per cent rate, the board will be paying its 4 crore subscribers Rs 370 crore more than it earns.
The finance committee of the board had said the subscribers cannot be paid more than 8 per cent ' the rate given to the provident fund for the cash it keeps in a government deposit scheme.
The Left had been lobbying the government to ask the finance ministry to increase that interest rate but the department headed by P. Chidambaram put its foot down and refused to do so.
The last time the rate was set at 9.5 per cent, there was a whiff of quid pro quo. The interest rate was announced a few hours after the cabinet cleared a proposal to raise the limit on foreign direct investment in telecom, fuelling charges that the Left was appeased with the provident fund announcement.
With the Bihar polls out of the way, the political compulsions of the government have eased and hard-nosed economics seems to have taken an upper hand for the time being.
However, sources said the government would gauge the ferocity as well as impact of the Left unions’ attack and decide whether to retain or increase the rate to 9 per cent.
The Left also hinted as much. “We take it as interim rate. Efforts will continue with the Prime Minister to retain it at 9.5 per cent,” a Left leader said.
The slash in rate was announced by labour minister K. Chandrasekhar Rao after a four-hour meeting of the EPF board of trustees here. Rao, as the board chairman, was authorised to take a decision after the panel failed to arrive at a consensus.
“We have decided to take out every single penny from our reserves to pay the rate of 8.5 per cent in the interest of workers,” Rao said.
The earlier 9.5 per cent rate had saddled the fund with a shortage of Rs 716 crore. The board bridged the gap by digging into a special reserve fund. But the reserves have now fallen to Rs 250 crore.