Friday, May 27 2005 12:29 Hrs (IST) - World Time -

New Delhi: Saddled with the daunting task of paying higher interest to its four crore subscribers, the Central Board of Trustees (CBT) of the Employees Provident Fund (EPF), will hold a special meeting tomorrow (May 28, 2005) to recommend the final rate of interest for 2004-05, which could be less than 9.5 per cent.

While the EPF Board had at its last meeting recommended 8.5 per cent as interim rate of interest for 2004-05, Finance Minister P Chidambaram recently announced 9.5 per cent interest, leaving the EPF Organisation to mobilise its own resources to bridge the shortfall of Rs 927 crore.

But, given Finance Ministry's refusal to provide interest subsidies, the EPF trustees might have to settle for 8.5 per cent despite the Labour Ministry pitching in for increasing the interest rate by one per cent from the interim rate.

The meeting, which will also discuss the interest rate for 2005-06, comes almost a month after Finance Ministry fulfilled the long-pending demand of Labour Ministry by ratifying 9.5 per cent interest for 2002-03 and 2003-04.

While the EPF earned a surplus of Rs 204.92 crore during 2002-03, there was shortfall of Rs 271 crore in 2003-04.

For 2002-03, the EPF board declared 9.5 per cent interest while for 2003-04 it was 9 per cent along with a 0.5 per cent bonus on the occasion of EPFO's golden jubilee year.

The representatives of central trade unions, which are one of the parties of the tripartite Central Board of Trustees of EPFO, had been attacking the Finance and Labour Ministries on the delay in ratifying the interest for last three years.

Though the rates for 2002-03 and 2003-04 were ratified, the Finance Ministry is awaiting a recommendation from the CBT for the interest rate to be ratified for 2004-05.

Already, an Investment and Finance sub-committee of EPFO has recommended 8 per cent for 2005-06, while trade unions questioned the veracity of the accounts prepared by the EPFO.

Going by the demands from the trade unions to continue with 9.5 per cent returns for 2005-06 as well, EPFO sources said the deficit would mount to over Rs 1,200 crore.

Assuming that EPFO will have to dole out an interest of 9.5 per cent as promised by the Government, especially to appease the Left, the EPFO will have to bank heavily on a corpus of over Rs 8,500 crore lying in interest suspense account to bail itself out.

Sources said higher returns could be offered only if there were changes in the investment patterns and that is the reason why CBT had recently appointed global consultant Mercer for suggesting ways to earn higher returns on its investments.

The move came after Finance Ministry's reluctance to allow EPFO to reinvest in Special Deposit Scheme (SDS), which comprise about 80 per cent of the EPFO's investments and park funds in high interest yielding postal deposits and NSC.

Of the corpus of over Rs 1,28,000 crore, as much as Rs 71,000 crore goes into EPF, Rs 52,000 crore in Employees Pension Scheme and another about Rs 4,000 crore in Employees Deposit-linked Insurance Scheme.

Tomorrow's meeting is also likely to consider the Annual Valuation of the Employees Pension Fund from 1.4.2000 to 31.3.2003 and discuss the report of the Sub-Committee of the CBT on the issue of the status of "Re-inventing of EPF India" and simplification of National Social Security Number (NSSN) allotment procedure as also the revised procedure for the issue of SSN cards to members.