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Finance Ministry man to be EPFO trustee

Shaji Vikraman
Hema Ramakrishnan

NEW DELHI, July 8

THE securities scam in the Seafarer's Provident Fund and the defaults on the bonds issued by IFCI seem to have prompted the Labour Ministry to take on board a representative from the Finance Ministry as a trustee in the Central Board of Trustees (CBT) of the Employees Provident Fund Organisation (EPFO).

The Labour Ministry, which has for the last couple of years been on collision course with the Finance Ministry particularly on the annual cut in the interest rate paid on EPF deposits and investment pattern, has decided to appoint a representative from the Finance Ministry as a trustee in the CBT.

The Joint Secretary in the capital markets division is likely to be the Finance Ministry's nominee on the CBT, senior officials said.

The CBT is a tripartite body chaired by the Labour Minister.

Besides the Chairman and the Vice-Chairman, the board has 40 trustees — five Union Government representatives, 15 State Government representatives and 10 employers and employees representatives each.

The board is scheduled to meet here on Tuesday under the chairmanship of the new Labour Minister, Mr Sahib Singh Verma, to consider the proposal to cut the interest rate paid on EPF deposit to 9 per cent.

Given the divergent views of the two Ministries over the interest rate issue, the Finance Ministry reckons that it would be prudent to have its own representative as a trustee on the board.

Although the majority view will prevail, the trustee has the right to dissent on any proposal, the officials said.

Like his predecessor, Mr Sahib Singh Verma has also said there was no rethinking in his Ministry on the interest rate on EPF deposits.

The Finance Ministry has also been pressing for the creation of a capital risk cover fund in the EPFO, particularly after the recent Government securities scam rocked some of the provident funds, including the Seafarers' Provident Fund.

"A corpus needs to be created as a contingency measure given that EPF deposits, unlike the GPF, are not backed by a guarantee from the government," the officials said.

Currently, the accumulated investment corpus under the EPF for both exempted and non-exempted establishments is estimated to be close to Rs 85,000 crore.

Although the CBT has sought a change in the investment pattern — permitting higher investments in Government Securities — the Finance Ministry is yet to take a final view.

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