‘EPFO Earning Can’t Support 8.7% Return’
New Delhi: The employee provident fund organisation (EPFO) did not have enough earning to declare even 8.7% return and will need to dip into its surplus, a government official privy to calculations told ET.
The finance ministry has come under criticism for declaring a lower than recommended 8.8% return for the year 2015-16. The labour unions have even threatened strike against the decision.
The labour ministry had sought North Block’s approval for declaring 8.8% return for the year based on the recommendations of the central board of trustees (CBT) of the EPFO. The calculations show that the EPFO had a surplus of .₹ 1,604 crore for FY15. At the proposed 8.8% return the surplus would have got depleted to .₹ 674 crore as its earnings for the year are not sufficient to distribute this kind of return.
This would have impacted the EPFO’s ability to deliver relatively stable returns in an era of declining interest rates. “The earning of the EPFO in 2015-16 is not even sufficient to pay 8.7%,” the official said.
The surplus would stand at .₹ 1,000 crore at 8.7%, still lower than that in FY15. Besides, there is also additional interest payment liability staring at the EPFO. As of now, the interest earned on 9 crore inoperative accounts holding more than .₹ 35,500 crore are distributed among all active account holders based on a CBT decision. This benefit will not be available from the next year as the CBT has decided to pay interest on inoperative accounts that it had stopped from April 1, 2011.
If these account holders are to be compensated for the interest denied for the past years then some surplus would have to be retained.