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Wednesday, Jun 26, 2002

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EPF deposits

This refers to `Finance Ministry sticks to 9 per cent rate on EPF deposits' (Business Line, June 24). The decision of the Finance Ministry is irrational and arbitrary for the following reasons. The Employees' Provident Fund Scheme, 1952, clearly states that the interest rate on the EPF shall be declared by the Central Government "in consultation with" the Central Board of Trustees, and it was interpreted by the apex court that the expression "in consultation with" generally means "in concurrence with". Thus, the Ministry's decision against the recommendation of the CBT is contrary to law.

Second, the Provident Fund is a compulsory contribution recovered from the employees, whereas instruments such as small savings are not. The benefit under the Provident Fund has been equated to the right to life by the Supreme Court. In such circumstances, the comparison made by the Finance Ministry between Provident Fund and small savings in the context of accreditation of interest is incorrect.

Third, the Finance Ministry has failed to take note of the fact that the interest to be credited to the PF members account for 2002-03 is from the returns on investment received for the year 2001-02 and hence the reduction in the interest rate on Special Deposit Scheme for the block year 2002-03 (which is stated to be the reason for reduction in the interest rate on PF) will not have the effect of reducing the interest rate on PF for 2002-03. Considering the above facts, I request the Finance Ministry to reconsider their decision in the above matter.

C. Ramesh

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