‘EPFO Earn­ing Can’t Sup­port 8.7% Re­turn’

The Economic Times - - Economy: Macro, Micro & More - Deepshikha.Sikar­war@ times­group.com

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.

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