PM hints at no hike in PF rate

Prime Minister Manmohan Singh says a higher interest rate on Employees Provident Fund would depend on whether the Employees Provident Fund Organisation could afford a higher payout.

"There is no scope for Budget subsidisation of the EPF rate. It is really a question of what the EPFO can afford," Dr Manmohan Singh told newspersons in Kuala Lumpur.

The implication of the prime minister's remark is that by throwing the ball into the court of the financially starved EPF Board, he was indicating that his government was averse to raising the pay-out to 4 crore (40 million) EPF subscribers.

A decision last week to reduce the pay-out on the EPF to 8.5 per cent from an earlier 9.5 per cent raised strong protests within and outside Parliament, with Left parties and trade unions crying foul.

The EPFO has taken a stand that its finances permit it to realistically pay an interest of 8 per cent, but would "try to find resources to pay another half a per cent."

The Left parties, who are supporting the UPA government from outside, however, have been demanding an increase in the interest rate paid by the government's Special Deposit Scheme where the bulk of the EPF money is parked. The Central government pays an 8 per cent interest on its SDS scheme.

But the Left parties and trade unions have been arguing that with the global interest rates hardening, the government should consider raising this rate which in turn would allow the EPFO to increase its pay-out to workers. However, official sources said this was unlikely.

The prime minister noted that last year also there was a demand for budgetary support.

"We made it clear that there would be no budgetary support and this stand is intact." Asked if he was satisfied with 8.5 per cent EPF rate as announced recently by the Board, Dr Manmohan Singh said, "It is not the question of whether I am satisfied or dissatisfied. It is a question of what EPF can afford. If they declare higher rates that they can sustain, I have no problem," he said, adding that the EPFO should find resources on their own.