Wednesday, January 11 2006 09:13 Hrs (IST) - World Time -

New Delhi: Rejecting demand of trade unions for retaining 9.5 per cent rate of EPF interest for the current fiscal, the Government yesterday (Jan 10,2006) notified 8.5 per cent rate as recommended by the Central Board of Trustees of the EPFO.

"The subscribers of the Employees Provident Fund are to get 8.5 per cent interest on their deposits for 2005-06," according to the notification issued by the Labour Ministry.

An official release said that the EPFO will meet the deficit of Rs.365.89 crore on account of 8.5 per cent interest rate from its own resources.

It said the total payout would be Rs.6,889.04 crore as interest to its four crore subscribers for the current fiscal against its projected interest income of Rs.6,523.15 crore.

The notification comes after a few rounds of meeting of the CBT chaired by Labour Minister K Chandrashekhar Rao, who recently met Prime Minister Manmohan Singh and Finance Minister P Chidambaram to apprise them of the strong demand from central trade unions to retain 9.5 per cent interest paid in last fiscal.

After the last round of EPF Borad meeting on December 7, Rao, as the Chairman of the Board, had recommended 8.5 per cent interest in view of its financial position.

The Finance Committee of the EPFO had recommended 8 per cent interest for this fiscal, which was supported by the Government but employees' unions stuck to their demand of 9.5 per cent.

Trade Unions in a joint letter to the Labour Minister had demanded that the rate should not be reduced from 9.5 percent.

Instead, they demanded that interest on Special Deposit Scheme and Government bonds should be raised to enable EPFO retain the interest rate at 9.5 per cent for 2005-06.

The reduction in EPF rate was suggested as EPFO ended up with a deficit of Rs 716 crore in 2004-05 by offering a high 9.5 per cent interest.

The deficit was met through the reserve fund which is now left with a corpus of Rs 250 crore.

Had EPF offered close to 8.5 per cent last fiscal, the fund could have avoided a deficit.

EPFO had a corpus of Rs 72,000 crore till March 2004, which grew to Rs 79,000 crore by March 2005.