Bowing to pressure from Left- backed trade unions, the Employees Provident Fund Board agreed on Monday to continue paying 8.5 per cent interest rate to its nearly 4 crore subscribers for fiscal 2006-07 as well.

"Amid protest by some trade union representatives, it has been decided to pay 8.5 per cent interest rate on provident fund," Labour Minister Oscar Fernandes told reporters after a three-hour meeting of the EPF Central Board of Trustees.

The decision to retain 8.5 per cent interest will put a burden of Rs 450 crore (Rs 4.5 billion) on the EPF fund but sources said that the deficit could be offset from a surplus of Rs 590 crore (Rs 5.9 billion) lying in the Interest Suspense Account, Contingency Reserve and Special Reserve Fund.

The board will submit its recommendations to the Finance Ministry, which is expected to notify the rate shortly. Fernandes said the EPF had constituted a sub-committee to assess the board's finances.

The report of the committee placed before the meeting for deliberation found that there would be a surplus of Rs 595 crore (Rs 5.95 billion) with the board.

Even after paying 8.5 per cent interest rate, the fund would be having a surplus of Rs 83 crore (Rs 830 million). The EPF has a corpus of Rs 94,000 crore (Rs 940 billion), including pension fund.

The total interest outgo for 2006-07 will be to the tune of Rs 7,800 crore (Rs 78 billion), Fernandes said, adding that the decision pertaining to interest payment for the current fiscal will be decided later.

Referring to the demand of trade unions to pay higher interest rate, he said the board had fixed interest rate only for the previous year. Since the bank rates have gone up mainly this year, the board can consider revising interest rate for 2007-08 later, he said.

Fernandes said the board also discussed the government's suggestion to invest five per cent of the corpus in the stock market but no decision was taken.

However, representatives of the Left-affiliated trade unions rejected the decision of the board, while demanding at least 9.5 per cent interest rate.

"At a time when banks are paying even up to 10.5 per cent interest rate annually, government should come forward to support the board to pay 9.5 per cent interest rate by raising administrative rate of interest on Special Deposit Scheme," said Sankar Sen, General Secretary, United Trade Union Centre Lenin-Sarani.