New Delhi, April 29: The government today said it will pay an interest of 9.5 per cent to some four crore subscribers to the state-run employees provident fund for the financial years 2002-03 and 2003-04.

Although the EPF board had earlier announced this rate, it could not credit the higher interest in subscribers? accounts, except of those who were exiting from the fund on retirement, as the finance ministry had not ratified it.

Today?s announcement is likely to involve a net outgo of about Rs 66 crore.

Finance minister P. Chidambaram, who announced the ratification today, said his ministry was awaiting the recommendation of the board on how it plans to pay 9.5 per cent for 2004-05.

?We want 9.5 per cent for all time to come. There should be no piecemeal decision. The government will have to do it. There is no option,? said Gurudas Dasgupta, the CPI leader who has been spearheading the Left effort to keep the EPF rate at 9.5 per cent.

Under Left pressure, Prime Minister Manmohan Singh promised continuation of the rate, despite advice to the contrary from the finance ministry. It is not clear how this money will be paid.

About 80 per cent of the EPF corpus is invested in a government special deposit scheme. The interest paid on this scheme was cut last year to 8 per cent, which means the EPF board has to find the money to bridge the 1.5 per cent gap. In cash terms, the gap between what the board earns and what it has to pay for 2004-05 is Rs 927 crore.

The board has rejected the option of investing 5 per cent of its corpus in stocks and another 5 to 10 per cent in high interest bearing private bonds.

The current average yield from EPF investments is estimated at 9.1 per cent, with public sector securities yielding the highest return. But these securities are also trying to cut interest rates.

Earlier, the minister said the Centre was unlikely to allow re-investment of interest incomes from EPF funds parked in the special deposit scheme. Implicit in this message is the suggestion that EPF funds should be invested in either stocks or high-yield bonds.