Fifty million subscribers to the Employees’ Provident Fund Organisation (EPFO) may not receive the 9.5% return they were promised five months ago.
Instead, they could be forced to settle for the 8.5% return they have been getting for the past five years due to a disagreement between the ministries of finance and labour.
The matter is likely to be escalated to Prime Minister Manmohan Singh.
The differences between the two ministries mean that claims will be settled on the basis of the lower rate.
Though account holders can re-apply for the difference between what they will get if their claims were to be settled now and what they would be owed if the higher rate were notified in future, the process is laborious and time-consuming.
The finance ministry has held up notification of 9.5% return – announced last September by the Central Board of Trustees (CBT), following the discovery of a surplus of R1,731 crore in the interest suspense account, which had accumulated since 1952.
The CBT, comprising representatives of employers, employees and the Centre, decided to distribute the amount among EPFO account holders in the form of a one percentage point increase in interest rate.
But, last month, the finance ministry decided not to notify the increased rate, pointing to CAG audits that had pointed out that 47.2 million accounts had not been updated.
“It is incorrect to call it (corpus of Rs1,731 crore) a surplus without first updating the accounts of all members. The CAG audit observed this amount could constitute liability payable to non-updated account holders,” finance secretary Ashok Chawla wrote to his counterpart in the labour ministry.
But the labour ministry stood its ground. “It is not correct to say the surplus cannot be ascertained till all accounts are updated,” Prabhat Chaturvedi, labour secretary, said.