People's Democracy

TU’s Joint Letter To Labour Minister

Following is the text of the joint letter written by trade unions to the labour minister on the issue of EPF interest rate.

The signatories to the joint letter are: Hasubhai Dave, A Venkatram and Baij Nath Rai (BMS) Ashok Singh and

 Nirmal Ghosh (INTUC), W R Varada Rajan (CITU), A D Nagpal (HMS), D L Sachdev (AITUC for Pardhuman

Singh) and Sankar Saha (UTUC-LS). Sanjeeva Reddy of INTUC did not attend the meeting.

WE, the undersigned members of the CBT, EPF, draw your kind attention to the repeated requests made by the central trade union organisations, both inside the CBT as well as outside, for restoration of the interest rate on provident fund to the pre-July 2000 level. 

As you are very well aware, the question of interest rate on the deposits of the Employees’ Provident Fund subscribers had been lingering as a contentious issue, ever since the government of India decided to reduce the administered rate of interest during successive years from 2000-01. Arising from this, the declaration of rate of interest for the years 2002-03, 2003-04 and 2004-05 had been a matter of uncertainty for unduly long periods.

As recommended by the 168th meeting of the CBT, the matter has been taken up with the government of India for continuing the Special Deposit Scheme and enhancing the rate of interest on it, since August 2004. Unfortunately, the government of India has so far not favourably responded to this. 

In your address to the special meeting of the CBT held on May 28, 2005, you referred to the ‘various trade union leaders’ having ‘met the prime minister’ and ‘made representations continuously for declaring the rate of interest  @ 9.5 per cent’. However, the said meeting took the unprecedented decision, by majority, of bridging the deficit of Rs 716.07 crore from the Special Reserve Fund to meet the interest for the year 2004-05 at 9.5 per cent. The meeting also noted that for declaring a rate of interest higher than the income of the fund, the government should bridge the gap of income deficit.

As the government persists with the administered rate of interest at 8 per cent and has resorted to issue government bonds (in which a minimum of 40 per cent of EPF funds are required to be invested as per the guidelines on investment) at interest rates further below that rate, the yield on the investments of the EPF is dropping to further lows.

In view of this, we request you to kindly take up the issue of enhancing the rate of interest on the Special Deposit Scheme, as well as on the government bonds, with the prime minister with the view to ensure that the rate of interest is, in the least, not reduced further for the present fiscal year of 2005-06.

The deposits in the EPF constitute the mandatory savings from out of the earnings of the workers, of which a very substantial portion remains invested with the government for almost the entire career life of the workers. You will appreciate that any reduction of the rate of interest on these deposits will hit the workers very hard and therefore the same should accorded a differential treatment as against the other market related interest rates.

We trust you will kindly accede to this request of ours and refrain from repeating the unhealthy precedent of breaching the time-honoured tradition of the CBT, EPF to arrive at decisions only by consensus and not by majority.