A part of the retirement funds of 11.78 crore members of the Employees Provident Fund Organisation (EPFO) is set to be invested in the stock markets, primarily in exchange traded funds (ETFs).

The proposal is expected to be notified soon, a Labour Ministry official told PTI on Tuesday after the Central Board of Trustees’ (CBT) meeting, adding that all over the world, equity investments have given highest returns.

In his Budget speech this year, Finance Minister Arun Jaitley had proposed a new investment pattern under which a minimum of 5 per cent of investible funds would be ploughed into equity or equity-related schemes.

Chidambaram’s initiative

The move to invest 5 per cent of the provident fund corpus of about ₹6 lakh crore with EPFO was first pushed by the Finance Ministry headed by P Chidambaram during the UPA-II regime but was opposed by the Labour Ministry and trade union representatives in the tripartite CBT.

However, the Labour Ministry under the Narendra Modi government has accepted the Finance Ministry’s proposal to invest part of the retirement funds in the stock markets. But, trade unions have been a divided house on the issue. After a meeting with the Labour Minister last year, G Sanjeeva Reddy, CBT member and President of INTUC, had told BusinessLine that his union was open to investing PF money in “anything that gets higher returns” but on the condition that it should be backed by the government guarantee to the workers.

In a statement, CITU president AK Padmanabhan, alleged that the Modi government’s current Labour Minister, Bandaru Dattreya, was backing employers demand for share market investment of 5-15 per cent of the PF corpus “ignoring total opposition” by trade unions, adding that in the past Labour Ministers used to take a position supporting the views of unions.

He said lifetime savings of workers should not be invested in the stock market as these were the only fall back for workers after retirement.

NPS option

In another key decision in Tuesday’s CBT meeting, Labour Minister Bandaru Dattreya announced that an employee will now have a one-time option for joining the New Pension Scheme (NPS) of the Pension Fund Regulatory and Development Authority in lieu of EPF scheme, a move opposed yet again by some trade unions.

The Employees’ Provident Funds (EPF) and Miscellaneous Provisions Act, 1952, will go to the Cabinet soon and then to Parliament for amendments, he told reporters.

Employer representatives, however, welcomed various proposals in the amendments under consideration, saying introduction of NPS will mean greater choice for workers as well as sharpen the competitiveness of Indian industry.

Labour Secretary Shankar Aggarwal, however, assured all stakeholders that their concerns will be addressed while giving final touches to the legislative amendments.

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