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Ambarish Mukherjee

NEW DELHI, May 27

THE Union Labour Minister, Mr Sahib Singh Verma, will take up the issue of retaining the 9.5 per cent rate of interest on provident fund deposits with the Finance Minister, Mr Jaswant Singh, on Friday, a day before the crucial meeting of the Central Board of Trustees (CBT) of the Employees Provident Fund Organisation (EFPO) scheduled for Saturday.

It may be recalled that last week the Finance and Investment Sub-committee of the EPFO had recommended an interest rate cut ranging between 50 basis points and 150 basis points on EPF from the existing 9.5 per cent.

According to highly placed sources, the Labour Minister's office has already asked for an appointment with the Finance Minister which will be finalised after Mr Verma, currently busy with political work in Gujarat, returns to the Capital on Thursday.

EPFO is facing a serious fund crisis this year because of the low interest regime, as a result of which the proposal to reduce interest rate has been mulled.

EPFO has around Rs 51,837.60-crore deposits in the special deposit scheme (SDS) against which the organisation will receive interest amounting to Rs 4,147.01 crore during the current year.

According to current estimates, the EPFO will receive another Rs 1,393.20 crore during the current fiscal from its investments in Central and State Government securities, public sector enterprises (PSEs) and other permitted securities.

The organisation also has Rs 86.05-crore receivables under the same heads for securities that have matured on or before March this year. This apart, it has Rs 35.75-crore receivables on account of interest on reinvestment of securities maturing up to March 2003. Added to this, the EPFO also has another Rs 48.04-crore receivables on account of reinvestment of interest proceeds.

EPFO will also receive an amount of Rs 32 crore on account of damages, as per this year's Budget estimates. Besides, the organisation has another Rs 35.91-crore receivables as interest from its deposits with the IFCI.

Sources said that even after taking all the receivables into consideration, it has been estimated that there will be a shortfall of around Rs 428 crore in case the present 9.5 per cent rate of return is to be retained.

Sources also pointed out that the EPF Act does not have provisions of deficit financing and, as such, any bid to make good the shortfall by the Government in the form of a one-time support may call for a change in the provisions of the Act. Sources noted that that all these issues are expected to come up for discussion between the Finance Minister and the Labour Minister on the eve of the EPFO trustee's meet where a formal decision may be taken.

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