EPFO board defers decision on interest rate, rejects invst in mkts

New Delhi, Jan 27 (UNI) The Central Board of Trustees (CBT) of Employees Provident Fund (EPF) today deferred the decision on interest rate on EPF to the next meeting while unanimously rejecting the option to invest five per cent of the EPF corpus in stock markets.

''The decision on the interest rate has been deferred to the next meeting. We need more time to reach at a decision in this regard. I have already held one round of talks with the Finance Minster and will seek another meeting with him,'' Minister of State for Labour Oscar Fernandes told reporters.

The next meeting of the board is expected in February-end or the first week of March, Mr Fernandes added.

''All the members of the board have also decided not to exercise the option, suggested by the Finance Ministry, of investing five per cent of the EPF corpus in the markets,'' he said.

The government has a shortage of funds and it is not possible to pay an interest of more than eight per cent on EPF, the minister said.

The Employee Provident Fund Organisation (EPFO) is expected to be left with a surplus of Rs 10.25 crore if it pays eight per cent interest in the current financial year. If the existing rate of 8.5 per cent is retained, the organisation will face a deficit of about Rs 450 crore.

The trade unions, especially the Left-supported ones, are demanding that the rate be raised from 8.5 per cent to 9.5 per cent.

The government last year cut the rate to 8.5 per cent for 2005-06 from 9.5 per cent in 2004-05.

All India Trade Union Congress (AITUC) Secretary D L Sachdev said after the meeting, ''We have demanded that decisions regarding the interest rate and the investment pattern of the fund shall be taken at a meeting with the Prime Minster, representatives of CBT and employees.'' Almost 80 per cent of employees' money remains with the government, which gives an assured return after retirement. ''It is not justifiable that while the government decides on the interest rate on EPF, the CBT fixes the investment pattern of the fund.'' The EPF corpus is currently being invested in government-run Special Deposit Schemes that gives returns at eigth per cent per annum.

After the rejection of the proposal to invest a part of the fund in stock markets, the stakeholders will have to think of someother means to increase the returns to the employees fund.

''For this, either the interest rate on EPF shall be raised to 9.5 per cent or such investment pattern has to be considered which gives higher returns than the present scheme,'' Mr Sachdev said.

The proposal to invest five per cent of EPF corpus was mooted by the government to tap the surge in the markets.

The Bombay Stock Exchange rose to a record 14,014.92 on January 3.

The last meeting of the CBT on December seven had failed to arrive at a consensus on the interest rate because of its weak financial position.

UNI