The EPFO today stuck to its decision that about 4.71 crore subscribers of the pension fund get one per cent increase in interest on their deposits for 2010-11, pegging the rate of interest at 9.5 per cent.
The Central Board of Trustees of the Employees Provident Fund Organisation (EPFO) also decided not to invest in stock markets. After a two-hour meeting of the CBT, Labour and Employment Minister Mallikarjun Kharge expressed hope the finance ministry will shortly give its concurrence to the proposal.
"I hope that after we answered all clarifications, they (Finance Ministry) will approve it (9.5 per cent interest rate for 2010-11)," he told reporters on the finance ministry's reservation on 9.5 per cent recommended by the Central Board of Trustees of Employees Provident Fund Organisation (EPFO) in September last.
"As far as 9.5 per cent interest (2010-11) is concerned, the Finance Ministry had sought some clarifications. Those clarifications have been sent by Labour Secretary to the Finance Ministry," Kharge added. Downplaying the ongoing tussle between the two ministries over hiking the interest rates on PF deposits, Kharge said there was "no tussle between the two ministries over giving 9.5 per cent interest rate."
"These are just consultations between the two ministries. They had certain queries and when we satisfy them. They will definitely approve it," Labour Secretary P C Chaturvedi later explained.
Although CBT, which is headed by labour minister, had decided to give a higher return of 9.5 per cent on provident fund deposits for 2010-11, the Finance Ministry had expressed its opposition to the move. Following discovery of Rs 1,731.57 crore in suspense account, the EPFO trustees favoured raising the rate of interest on provident fund deposits to 9.5 per cent for its 4.71 crore subscribers from 8.5 per cent which is being paid by EPFO since 2005-06.
The decision, however, did not find favour with the Finance Ministry which argued that there was no real surplus. It said the surplus shown by the EPFO arose because all subscribers' accounts were not updated.
In a recent letter of January 29, the Labour Ministry argued the EPFO is not asking for any government support for the extra returns to the salaried workers. It is their money which has earned returns. The Finance Ministry's objections were based on a report by Comptroller and Auditor General which suggested that there was no surplus with the EFFO's interest suspense account.
The Finance Ministry has to give concurrence to the rate of return decided by CBT and notify allowing tax exemption on the entire such earnings on PF deposits. Meanwhile, the retirment fund manager, which has a corpus of Rs 5 Lakh crore, said it will not invest in the stock market in absence of any guarantee on returns and safety of the money by the finance ministry.
"We don't want to invest in equities. No futher decision has been taken on this and same status (of not investing PF money in stock market) would prevail," Kharge said. During the meeting, the EPFO also approved a proposal to resume investment in the scam-hit LIC Housing Finance, a subsidiary of the country's largest insurance company Life Insurance Corporation.
The CBT had suspended investment in housing finance company following disclosure of the bribe-for-loans scam in November 2010 in which top officials of the LIC Housing Finance were allegedly involved.