The Hindu Business Line : ‘EPFO bypassing finance committee in allocating funds’

New Delhi, Aug. 28 The Employees Provident Fund Organisation on Thursday completed the formalities for appointment of multiple fund managers and signed agreements with four new fund managers HSBC AMC, ICICI Prudential AMC, Reliance Capital AMC and the State Bank of India.

All the selected asset management companies together will manage an amount ranging between Rs 25,000 crore and Rs 29,000 crore, which is to be invested in the beginning of September and for which funds would have to be put into their respective investment accounts by August end.

However, according to the All India Trade Union Congress, the EPFO is bypassing the Finance and Investment Sub-Committee (F&ISC) of the Central Board of Trustees (CBT) in deciding on the amount of fund to be allocated to each fund manager for investment. According to CBT members, it was decided in the CBT meeting held on July 29 that allocation of funds will be decided by the F&ISC.

Fund plan

The EPFO is now planning to allocate the funds among the four fund managers only in consultation with Labour Minister who by virtue of his post happens to be the Chairman of the Board of Trustees. EPFO is not informing other trustees details of allocation before transferring funds to the investment accounts of the respective fund managers, senior members of the CBT said.

Two Central trade unions - AITUC and the Hind Mazdoor Sabha - have already taken up the matter with the Labour Minister and the other unions are likely to follow suit, trade union sources said.

Several labour leaders, who are members of the CBT, told Business Line that, “the draft minutes of the meeting sent to us suppresses the fact that it was a unanimous decision to leave allocation of funds to the F&IFC.”

In its letter to the Labour Minister the AITUC has said that “the draft minutes circulated of the special meeting of the CBT held on July 29, 2008 do not clearly record the viewpoints of the Central Trade Unions.”

“We are further surprised to note that whereas allocation of funds to fund managers was left to the finance committee the minutes do not carry this,” the AITUC said in its letter to the Minister.

“It appears that the EPFO has already decided about the allocation of funds to the newly selected fund managers which is against the general consensus arrived in the meeting,” the letter said.

The AITUC would be sending the details of the distortions made in the minutes by EPFO officials to the Minister next week, sources said.

Pre-bid meet

In the pre-bid conference between the EPFO and the asset management companies it was indicated that an amount in the range of Rs 25,000 crore to Rs 29,000 crore would be allocated to the fund managers.

According to the minutes of the last CBT meeting, around Rs 10,000-12,000 crore would be given to the lowest bidder, the second bidder would get funds in the range of Rs 8,000 crore to Rs 12,000 crore and the third bidder would receive about Rs 7,000 crore to Rs 8,000 crore.

However, with the CBT finally going in for four bidders, the new allocation pattern was supposed to be decided by the F&ISC but the EPFO is not going by the generally accepted principle of allocation by consensus, the AITUC secretary and CBT member, Mr D.L. Sachdeva, said.