Union Labour and Employment Minister Bandaru Dattatreya has alerted the Prime Minister’s Office about the adverse implications of a recent decision by the Finance Ministry to not pay depositors of Employees’ Provident Fund (EPF) and small savings schemes’ the funds that have been unclaimed for seven years.
In a meeting with Nripendra Misra, Principal Secretary in the Prime Minister’s Office last week, Mr Dattatreya had raised concerns about the possibility of fresh backlash, especially given recent protests against the Government’s decisions relating to the EPF. Since March 7, the finance ministry has rolled back its proposal to tax 60 per cent of EPF savings at retirement and lower the EPF rate for 2015-16, while the Labour Ministry dropped a rule that would restrict access to EPF balances for members till they turn 58 years of age.
In March, the Finance Ministry notified new rules that would allow it to divert ‘unclaimed’ deposits in EPF, PPF and other small savings instruments to a new Senior Citizens’ Welfare Fund proposed in last year's Budget.
“The Minister has apprised him (Mr Misra) that unclaimed EPF savings have definite claimants and workers or their nominees can claim the money even after several years, so it is a misnomer to term them unclaimed deposits,” a senior labour ministry official told The Hindu .
The Labour Minister is also learnt to have argued that the amount paid out to beneficiaries of inoperative accounts – that were defined as accounts with no fresh inflows for three years - have risen drastically in the past few years. According to official estimates, dues paid out of inoperative EPF accounts –have gone up drastically from Rs 955 crore in 2011-12 to Rs 4,316 crore in 2013-14 to Rs 6,491 crore in 2014-15. While the Centre had decided to stop annual interest credits into such accounts from 2011-12, it has reversed the decision starting this April. At present, 9.23 crore out of total 15 crore accounts with deposits of over Rs 43,000 crore are termed inoperative.
Mr. Dattatreya also raised this issue in his meeting with Finance Minister Arun Jaitley to discuss the EPF rate for 2015-16, over which the two ministries had differences of opinion. Labour Secretary Shankar Aggarwal and Additional Labour Secretary Heera Lal Samariya were also present in the meeting.
“The funds, as per para 53 of the EPF Scheme, 1952, cannot be expended for any purpose other than payment to individual members,” Mr. Dattatreya had said in a written reply in Lok Sabha.
According to a Finance Ministry notification on March 18, deposits, unclaimed for over seven years, of EPF, PPF and small saving schemes such as Post Office Savings Accounts, Post Office Recurring Deposit Accounts and National Savings Certificates subscribers will be diverted towards setting up a Senior Citizens’ Welfare Fund. The move was announced by the government in the last Budget.
Finance Act 2015The Finance Act of 2015 didn’t specifically mention the EPF, but said “inoperative accounts of Small Savings schemes, PPF and such other amounts, in any accounts or schemes as may be prescribed” will be utilised to set up the Fund.
The Finance Ministry notification came two weeks before the EPF central board of trustees chaired by Mr. Dattatreya scrapped the 2011 move to stop interest credits on inoperative PF accounts. The decision was approved by the board on March 29.
Trade unionsTrade unions have written to the government to reverse the decision to divert EPF funds for other purposes, without the concurrence of the board of trustees.
“Even a part of the EPF funds can in no way be appropriated by the government for any other purpose without the consensual concurrence by CBT. The CBT has never concurred with such a move; rather the employees representatives in CBT in its meeting held on 11th March 2015 raised the issue themselves and vehemently opposed such idea of appropriation of a part of EPFO fund in the name unclaimed deposit for any other purpose by the Govt. These are all matters of record,” Tapan Sen, General Secretary, CITU, has said in a letter to Mr. Jaitley.
