The government proposed on Tuesday to invest 1% of its Employees’ Provident Fund (EPF) corpus into equity and related schemes and hike it gradually to 5%, a key reform measure expected to boost buoyant Indian markets.
The labour ministry also decided to go ahead with the suggested changes in the Provident Fund Act that seek to give employees the option to invest in the National Pension Scheme (NPS) despite opposition from trade unions.
“We are not putting 100% of the money in equity. We will start with 1% and review the returns and then try to reach 5%. We are going very, very gradually,” said KK Jalan, commissioner of Employees’ Provident Fund Organisation, following the meeting of the Central Board of Trustees (CBT), the EPFO's apex decision-making body.
The ministry will take the draft bill first to the cabinet and then introduce it in Parliament this session.
“We have informed the parliamentary affairs minister already about this as it (the draft bill) has to be introduced in Parliament session in April,” said labour minister Bandaru Dattatreya after tripartite consultations involving industry and trade unions.
Finance minister Arun Jaitley suggested in his February budget speech that the Employees’ Provident Fund Organisation (EPFO) should invest at least 5% of its Rs 6 trillion-plus corpus in the capital market, following which the labour ministry decided to examine the proposal.
Other changes suggested in the draft bill include pooling of all allowances in wages for deducting PF contribution, extending Employees’ Provident Fund coverage to companies that engage fewer than 20 people and making EPF contribution optional below a certain income threshold.
Companies resisted the new provident fund calculation formula as this will force employers to contribute more towards the PF amount.
At present, the PF liability is computed on the basic wages of workers, which include basic pay and dearness allowance only.
“All the trade unions were unanimous in opposing some of the changes the government intends to carry out if the EPF,” said AK Padmanabhan, president of CITU, a trade union affiliated with the CPI (M).