INDIA BUSINESS WORLD - DECEMBER 2005
THE MONTH THAT WAS

EMPLOYEES PROVIDENT FUND TO PAY 8.5%

The Employees Provident Fund Organisation (EPFO) finally took a hardnosed business judgement call and announced an interest rate of 8.5% for 2005-06. The decision comes after the EPFO had struggled for the past three years to pay 9.5%. A decision on investing 5% of the corpus in MFs and equity is to be taken at a CBT meet in January. The announcement on the interest rate was made by labour minister Chandrashekhar Rao after a marathon five-hour meeting of the Central Board of Trustees, overriding TU protests insisting on nothing less than 9.5% for this year too.

Mr Rao, who argued for an 8.25% payout at the meeting, refused to dub this either as an ‘interim' or a ‘final' interest rate. Sources said pressure had been mounting on the CBT to clinch a decision today given that around 10 lakh EPFO subscribers have already retired this year and have to be paid interest. Expecting this to materialise as an ‘interim' interest rate, TUs authorised the CBT chairman to talk to the Prime Minister at the Indian Labour Conference on December 9 and 10, for a Rs 800-crore support.

The 8.5% rate is meant as a kind of olive branch to the TU representatives, as is the decision to go ahead and set up a three-member panel to go into other EPF investments in order to ‘explore' possibilities of a higher payout later.