The Hindu Business Line : EPFO settling claims at interim rate of 8.5 pc

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EPFO settling claims at interim rate of 8.5 pc — Subscribers to lose if rate hiked later

Ambarish Mukherjee

New Delhi , Oct. 16

THE Employees Provident Fund Organisation (EPFO) is settling claims of subscribers who have been closing their accounts since April this year, assuming the interim rate of 8.5 per cent to be the final rate. This may lead to losses to the subscribers if the rate is later increased.

Subscribers who retired during the current financial year and those who closed their accounts are being credited with an interest of 8.5 per cent for 2004-05, which was announced as an "interim rate" by the Labour Minister, Mr Sis Ram Ola, in August this year.

This could result in losses for them as the Minister also announced that a higher rate could be considered as the final rate payable for the current fiscal, depending on the availability of funds with the EPFO around the end of the fiscal. This is because, during the settlement, the provision of extra payment, if the final rate increases, is not there .

"However, it is only a possibility which may not come true because there is no way that the EPFO could pay more than 8.5 per cent this year. Even for paying this 8.5 per cent, we have dipped into our seed money and have taken out Rs 200 crore for this purpose. Otherwise, the fund was not in a position to pay even 8.5 per cent," EPFO sources told Business Line.

But the fact is that there is tremendous pressure from trade unions, particularly the Leftist unions' representatives in the Central Board of Trustees (CBT) of the EPFO to increase this rate to at least last year's level of 9 per cent.

But settling the claims, assuming the final rate to be 8.5 per cent, opens up a case where the subscribers whose accounts are settled as "full and final" stand to lose if the rate is eventually increased.

A simple calculation shows that a subscriber whose total PF corpus is Rs 1 lakh and who retired at the end of September 2004 will get Rs 4,250 as interest for the first six months of 2004-05.

If the rate subsequently increases by 0.5 percentage point per cent to 9 per cent, then, assuming the interim rate to be the final rate would cause him a loss of Rs 250 from the current year's interest.

Already, many subscribers are complaining. Because, sources said, the EPFO is settling the accounts as "full and final settlement" instead of keeping a provision to pay the extra interest if the rate is increased subsequently. "And, because it is full and final settlement, the concerned subscribers would not be able to take legal recourse also," a senior legal expert told Business Line.

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EPFO settling claims at interim rate of 8.5 pc — Subscribers to lose if rate hiked later