Government does u-turn on EPF, agrees to 8.8 percent interest rate
New Delhi/Chennai: Bowing to persistent pressure from trade unions and political parties, the Centre on Friday increased the interest rate on employees provident fund (EPF) deposits to 8.8 percent from 8.70 percent announced earlier for 2015-16.
“I am happy to tell you that the EPF rate has been increased to 8.8 percent,” Labour Minister Bandaru Dattatreya told reporters in New Delhi.
The provident fund rate was 8.75 percent in 2014-15 and the Central Board of Trustees (CBT) had recommended to make it 8.8 percent for this fiscal. However, the finance ministry had rejected the recommendation and had approved only 8.70 percent interest, citing lower earnings.
“The protest was successful with workers across the country participating in it,” Centre of Indian Trade Union (CITU) president A.K. Padmanabhan told IANS over phone.
Padmanabhan is also a member of the Central Board of Trustees (CBT) of EPFO.
Most trade unions had protested the decision and the issue was also raised by political parties both in parliament and outside.
Trade unionist and Communist Party of India-Marxist MP Tapan Kumar Sen had also raised it in the Rajya Sabha.
Trade unions had threatened to intensify their agitation from September if the government did not comply with the demand of higher EPF interest rates.
All India Trade Union Congress (AITUC) general secretary D.L. Sachdev termed the Friday protest call by the central trade unions as successful.
“We oppose even a slight reduction in the interest rate after the recommendation by the CBT. The CBT had recommended 8.8 percent whereas the central government reduced it to 8.7 percent,” he said.
According to Padmanabhan, the argument that interest rates on public provident fund (PPF) and other small savings schemes have come down and the employees provident fund interest rate cannot be immune is not sustainable.
“The corpus belongs to the workers and the interest is paid out of income from the corpus,” he said.
As the government decided to agree to 8.8 percent interest rate, Padmanabhan said this is the third time the BJP-led central government is backtracking on its decision faced with strong opposition.
On April 19, close on the heels of violent agitation in Bengaluru and also demand from trade unions, including from RSS-affiliated Bharatiya Mazdoor Sangh (BMS), the government had withdrawn its new rules of provident fund withdrawal.
Padmanabhan said EPFO has the necessary funds to pay higher interest rate.
“The CBT of EPFO is the final authority on the all matters. As per the EPF Act, the CBT has the full powers. All these years the central government agreed to the recommendations of the CBT,” Padmanabhan said.
According to him, even with offering an interest rate of 8.95 percent, the EPFO will have a surplus of around Rs.91 crore.
Welcoming the government’s decision, national secretary of the All India Trade Union Congress Vidya Sagar Giri told IANS: “If the government has rolled back its decision then it is good.”
Calling the government’s move anti-labour, Giri said: “The government is only worried about lending money to corporates at lower interest rate and that too on the cost of the poor labourers.”
He also slammed the government for behaving like a dictator and said: “The government has become a dictator. The EPFO’s CBT, the apex body during a meeting held in February this year, had proposed an interim rate of interest at 8.8 percent to be credited to the EPF subscribers for 2015-16 in the presence of Union Labour Minister Bandaru Dattareya.”
“How the finance minister can overlook the decision of the apex body?” he wondered.
Sachdev, meanwhile, claimed that the central government “wants to dilute the PF and direct the funds to New Pension Scheme and also to the stock markets”.
“Social security schemes cannot be left to the vagaries of the stock market,” he said, adding that the government seems to be going towards the goal of making PF an optional scheme for the workers which is not good.
According to the new norms proposed earlier this year, subscribers would not be allowed to claim withdrawal of PF after attaining 54 years of age, and would have to wait till 57.
The earlier norms allowed contributors or subscribers to claim 90 percent of their accumulations in their PF account at the age of 54 years, and the final claims to be settled just one year before their retirement.