Will PF interest rates be cut?

The EPFO Board will for the third time meet in New Delhi on Tuesday to decide on the interest to be offered to its three crore subscribers this year, even as trade unions' demand higher returns.

The last two meeting of the EPFO Board failed to reach a consensus due to the simmering differences between the EPFO's offer of 8.0 per cent interest rate and trade unions' demand for 12 per cent.

The Central Board of Trustees of Employees Provident Fund Organisation, which offered 9.5 per cent return in 2003-04, held that any returns over 8.0 per cent will be unsustainable and also ruled out differential rates.

However, there was lack of consensus among unions since the Congress-backed INTUC was willing to agree at 8.25 per cent, while CPI(M)-affiliated CITU and Sangh Parivar-clan BMS pressed for 12 per cent and CPI's AITUC pitched for 9.5 per cent.

According to EPFO, 12 per cent return would lead to an unfunded gap of Rs 2,729 crore (Rs 27.29 billion) between interest earned and spent and 9.5 per cent would lead to an unfunded gap of Rs 927 crore (Rs 9.27 billion). Only at 8.0 per cent, it would be able to earn a surplus of Rs 154 crore (Rs 1.54 billion).

The recommendations of the CBT would go to the finance ministry for ratification, after which the labour ministry would issue a notification.

Taking a dig at the EPFO's presentation, BMS president Hasubhai Dave alleged that "accounts placed before us contain several lacunae" and said calculations based on such accounts "cannot be accepted as rational".