9.5% EPF rate okayed for FY03, 04

The finance ministry on Friday ratified the interest rate of 9.5 per cent for about 4 crore subscribers of Employees Provident Fund for 2002-03 and 2003-04.

However, the ministry is awaiting the recommendation of Central Board of Trustees of EPFO for ratifying the interest rate for 2004-05, Finance Minister P Chidambaram said on Friday.

For 2002-03, the EPF board declared 9.5 per cent while for 2003-04 it was 9 per cent along with a 0.5 per cent bonus for the year being a golden jubilee year. But these rates were ratified only on Friday.

Ahead of assembly elections last year in Bihar, Jharkhand and Haryana, Chidambaram, after meeting Prime Minister Manmohan Singh, had announced that government would offer 9.5 per cent interest in 2004-05 as well.

The Central Board of Trustees of EPFO, headed by Labour Minister K Chandrasekhar Rao, had estimated that there would be a deficit of Rs 927 crore (Rs 9.27 billion) between what it earns on investments and higher interest of 9.5 per cent interest to be paid to subscribers during 2004-05.

The EPFO board is expected to meet in May to formulate its recommendations and discuss ways of bridging the deficit and arrive at the interest rate for 2005-06.

Rao, who had met Prime Minister Manmohan Singh in this regard, maintains that the EPFO would strive to bridge the shortfall on its own and if it was not possible, then Finance Ministry would have to pitch in.

CBT had earlier recommended an "interim" 8.5 per cent to EPF subscribers, which was subsequently raised to 9.5 per cent after trade unions, mainly belonging to Left parties insisted on higher rates.