EPF rate cut

The government has again reduced interest payable to retirement fund accounts of about 5 crore salaried workers. The 8.55 per cent interest rate for 2017-18, announced on Wednesday, is the lowest in five years. The move has anguished 50 million subscribers, who are forced to conclude that the Modi government is anti-middle class. Their angst is not without any basis. They are fast losing options to save money for their future. Returns of bank deposits are a pittance, not sufficient to even neutralise the rising inflation. Besides, it is increasingly becoming risky to keep money in banks due to growing cases of Nirav Modi kind of scams. If bank frauds become unmanageable, under the proposed banking legislation, depositors would lose their entire savings. Investing hard-earned money in extremely volatile stock market is full of risk. The real estate has already lost it sheen. Gold is often an idle investment option because of sentimental reasons. Amidst such gloomy scenario, the policy-makers are hell-bent upon destroying the only secured provident fund option available to the salaried class.

The government could have retained the interest rate at 8.65 per cent and it would still have had a surplus of about Rs 48 crore. What is the need to set aside Rs 500-600 crore surplus every year? Apparently, this is a relatively new trend in EPF management. It is deliberate. It seems that the government wants to check the growing popularity of EPF, which is a threat to other pension schemes, particularly the Finance Ministry’s brainchild — the National Pension System (NPS). Such is the bias that the previous Budget gave EPF subscribers an option to migrate to NPS, but not vice versa. Why demolish an institution to promote another? Instead of pulling down EPF, the government should make NPS more lucrative.

It is not a secret that the Finance Ministry indirectly controls EPF rates even though the matter is under the administrative control of the Labour Ministry. It is unfortunate that the Labour Minister, who is expected to protect interests of workers, succumbed to pressures from the North Block. Instead of deflating EPF’s popularity, the government should take initiatives to make it more competitive.