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Govt rolls back stricter PF withdrawal norms

Source: PTI
Last updated on: April 20, 2016 10:50 IST
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In a placatory move, the labour ministry also said it was contemplating permitting withdrawal of all accumulations by Employees' Provident Fund Organisation's subscribers on grounds like purchase of house, serious illness, marriage and professional education of children

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Buckling under protests and street violence in Bengaluru, the government on Tuesday rolled back its order tightening rules for withdrawal of provident fund money, within hours of keeping it in abeyance for three more months.

"The notification issued on February, 10, 2016 is cancelled. Now the old system will continue," Union Labour Minister Bandaru Dattatreya said at a press conference in hyderabad.

"I will take ratification from CBT (Central Board of Trustees of EPFO)," he said after violence rocked Bengaluru for the second day when garment industry workers torched several buses and attacked a police station protesting against the tightening of rules.

Later, the Labour Ministry issued a statement to say that "the workers are now free to withdraw the entire amount from the provident fund as per existing provisions... including the employers' share of 3.67 per cent".

Earlier in March, the government had to withdraw a proposal to tax provident fund withdrawals, after widespread criticism of the move that was mooted in the Union Budget.

The February notification put curbs on full withdrawal of provident fund by members after unemployment of more than two months, while it also barred withdrawal of the employer's contribution before the age of 58 years.

The decision was first to come into effect immediately, but was first deferred till April 30 and then till July 31, before being scrapped totally Tuesday evening.

Giving reasons for the rollback, Dattatreya said, "The reason is the request of trade unions. The earlier decision (to tighten the PF withdrawal norms) was also taken by the opinion of the trade unions. Now, when the trade unions are requesting, then we have rolled back the decision."

Earlier in the day in New Delhi, the Minister had said, "The notification (tightening PF withdrawal norms) will be kept in abeyance for three months till July 31, 2016. We will discuss this issue with the stakeholders."

Dattatreya said employees and workers need not have any misconceptions in the wake of the cancellation of the order.

In a placatory move, the labour ministry also said it was contemplating permitting withdrawal of all accumulations by Employees' Provident Fund Organisation's (EPFO) subscribers on grounds like purchase of house, serious illness, marriage and professional education of children. The matter has been referred to law ministry for clearance.

People had also launched online campaign against the decision, which was first to be implemented from February 10.

Protesters pelted stones at a police station in Bengaluru and torched seized vehicles parked there, as the spontaneous agitation with no trade union leading it spun out of control.

Police said they had to resort to lathicharge and fire teargas shells to disperse violent protesters.

At least two Karnataka State Road Transport Corporation buses and one of Bengaluru Metropolitan Transport Corporation were set on fire, they said.

Incidents of stone-pelting on buses and other vehicles were reported from different parts of Bengaluru such as Bannerghatta and Jalahalli cross, as also near the Electronics City, the hub of IT firms.

Traffic jams were reported at various entry and exit points in the city like Hosur Road, which leads to Electronics City and Tumkur Road, which has a large concentration of

garment units.

In a bid to assure the agitating workers, Union Minister Ananth Kumar, an MP from Bengaluru, said the right of unorganised and garment workers would be restored and appealed to them to withdraw their protest.

Police said other workers too joined garment workers in the protest today. There are approximately over 12 lakh garment factory workers in Bengaluru.

Workers opposing amendment to EPF Act have expressed fear that the new rule would take away their right over employer's contribution of provident fund till they attain 58 years.

Following the concerns raised by trade unions and other stakeholders, the ministry had earlier decided to keep the notification in abeyance. The unions however wanted a complete rollback of the decision tightening the PF withdrawal norms.

The scrapping of the notification would mean that the EPFO subscribers who are out of job for more than two months can file for full and final settlement of provident fund.

The proposal to amend the scheme to allow all accumulations on different  grounds like purchase of house, serious illness, marriage and professional education of children, has been sent for vetting by the law ministry.

Earlier in February, the EPFO had amended the EPF Scheme 1952 to tighten the various norms for withdrawal of provident fund including increasing age limit for filing such claims by retiring employees to 58 years from 54 years.

Besides, the EPFO had also restricted withdrawal of PF to own contribution of subscribers and interest earned on that, if the claimant has remained unemployed for more than two months. The member would be able to withdraw employer's contribution on maturity.

Earlier norms used to allow subscribers to claim 90 per cent of their accumulations for investing in the scheme after attaining the age of 55 years.

In its statement, the Union Labour Ministry said the amendment was carried out "with the consent of trade unions and with the intention of promoting a decent accumulation of provident fund for the members at the end of their working lifetimes".

“However, considering the representations received from various quarters and after consultations with the various stakeholders... the government has decided to withdraw the said February 10, 2016 notification with immediate effect," it said.

The objective of the notification was "to provide a minimum social security to the workers at the time of retirement," the ministry said, adding that it was noticed that over 80 per cent of the claims settled by EPFO belonged to pre-mature withdrawals of funds, treading the EPF accounts as "savings accounts, and not a Social Security Instrument".

The revised rules would have allowed an employee to withdraw his or her own share from the fund (which is 12 per cent of the wages), but the employer's share of contribution towards the PF (which is 3.67 per cent of wage) could have been withdrawn only at the age of retirement at 58 years.

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