After getting the finance ministry’s approval for the 9.5% interest on EPF accounts, the labour and employment ministry is facing a challenge from industry bodies and companies who run their own EPF trusts — they are declining to pay the higher rate of interest to their subscribers.
In September, the central board of trustees of the EPFO decided a higher interest rate for 2010-11 — 1% more than the last five years. The rate, they claimed, is based on unrealised Rs1,731 crore in the interest suspense account.
“Thanks to its mismanagement for over 50 years and a realisation last year, the EPF stumbled upon the hidden treasure. Let them hand out the same to its subscribers...but it would be unfair to ask us private trusts to pay the same rate,” said Ravi Wig, national president of the Employers Federation of India (EFI) and former head of PHD Chambers.
Though the exempted establishments would have had no option but to go with the revised rate, the finance ministry’s questioning of the higher rate of calculation has provided ammunition to these companies.
The ministry, which earlier objected the 9.5% interest for 2010-11, last week notified the rate with a rider that all 4.71 crore EPF accounts be updated within six months.
“The ministry’s turnaround last week shows the notification is nothing but a populist measure in the run up to elections...,” said Michael Dias, secretary, the Employers Association of Delhi and executive committee member of the All India Organization of Employers under FICCI.
Samirendra Chatterjee, central provident fund commissioner said the private trusts should give the same interest. If they do not, we will take over the accounts and the trusts.”
There are 2,750 establishments that manage their own EPF accounts.
Though exempt from direct purview of EPFO, they follow the investment pattern and interest rate as set by the central board of trustees of the EPFO
The companies — including Tata, IFFCO, Maruti, Ranbaxy, Nestle and HCL — have a total of 48 lakh subscribers and a corpus running into over Rs1 lakh cr.