In a setback for the employees, the government has slashed the interest rate of the Employees Provident Fund (EPF) from 9.5 per cent to 8.25 per cent for the year 2011-12.
With the decision, over 4.7 crore employees will be affected. The cut was proposed by the Finance Ministry and a notification has been issued by the Labour Ministry on Thursday.
The subscribers were provided 9.5 per cent interest rate by the Employees' Provident Fund Organisation (EPFO) for 2010-11.
However, the Labour Ministry had recommended 8.6 per cent rate of interest for the current fiscal year to the EPFO subscribers.
The 8.25 per cent interest for 2011-12 would leave a deficit of Rs 24 lakh, while 8.5 per cent rate of return would translate into a deficit of Rs 526.44 crore.
However, the government's decision was opposed by Hind Mazadoor Sabha. The organisation secretary AD Nagpal, who is also an EPFO trustee said, it is unfair to the employees. The matter will be discussed at the next meeting of the Central Board of Trustees.
The Finance Ministry had intervened to the matter after the EPFO trustees failed to decide on the interest rate of the EPF for the current fiscal year.
There was a sharp difference among the trustees on the issue. While the EPFO had suggested the interest rate of 8.25 per cent for 2011-12, the trade union members suggested retaining 9.5 per cent.