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Ambarish Mukherjee

New Delhi , Feb. 9

A NEW technical problem has cropped up in paying 9.5 per cent interest to the subscribers of Employees' Provident Fund Organisation (EPFO) for the current financial year since the EPF Act does not permit the organisation to accept funds from any sources for paying interest.

According to a Labour Ministry official, a new mechanism needs to be evolved to enable EPFO accept the funds from Government at times of necessity.

The Government has recently announced that the EPFO would pay 9.5 per cent interest for fiscal 2004-05 to its subscribers.

While the EPF Act gives the Centre the right to decide the rate of interest payable on EPFO deposits in consultation with the Central Board of Trustees (CBT) of the EPFO, it does not permit the EPFO either to accept grants, nor does it allow over withdrawal from the interest suspense account to pay interest to the subscribers.

The CBT will be meeting on February 21 to take a view on the entire situation.

The Prime Minister, Dr Manmohan Singh, announced last week that the interest payable on EPFO deposits for fiscal 2004-05 would be 9.5 per cent.

In August last year, the CBT had recommended an interim rate of 8.5 per cent.

Following the Prime Minister's announcement, the Labour Minister, Mr K. Chandrasekhar Rao, has indicated that if necessary the Government would step in to bridge the gap between EPFO's interest earnings and interest liabilities.

The Prime Minister had also asked the Labour Minister to examine what could be done by the EPFO itself in the board CBT meeting scheduled on February 21 in meeting the interest liabilities and inform the Prime Minister accordingly. Currently, the EPFO has more than Rs 800 crore deposits which have not yet been claimed and out of this, around Rs 262 crore will never be claimed. The total corpus of EPFO stands at Rs 1.28 lakh crore which includes Rs 71,000 crore of the Employees Provident Fund, Rs 52,000 crore of the Employees Pension Fund and Rs 4,000 crore of the Employees Deposit-Linked Insurance Scheme. The projected interest income of the EPFO for fiscal 2004-05 stands at Rs 5,919.42 crore.

The interest payment liability, if a 9.5 per cent interest were paid, would stand at Rs 6,846.57 crore and the deficit is estimated to be Rs 927.15 crore.

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