Government may relax rule to enable sick public sector firms to run their own PF trusts

The government will soon amend the Employees Provident Fund Scheme 1952 to enable loss-making public sector enterprises to continue to run their own PF scheme.

A senior Employees’ Provident Fund Organisation (EPFO) official said: “We have got a go ahead from the law ministry to amend the Employees’ Provident Fund Scheme, 1952 for this relaxation and the labour ministry will now seek concurrence of the Finance Ministry before amending the scheme.”

Under the current rules, loss-making and sick public sector enterprises and private companies which have been recording losses for three consecutive years, cannot operate their own PF trusts.

There are about 3,000 companies that manage employees’ savings worth nearly Rs. 2.74 lakh crore through such PF trusts to give the staff speedier and simpler access to their retirement corpus at a lower cost.

Public sector firms such as Oil and Natural Gas Corporation Limited (ONGC), Bharat Heavy Electricals Limited (BHEL) and Hindustan Aeronautics Limited (HAL) also have their own PF trusts.

However, the PF trusts of firms incurring losses for three successive years are transferred to the state-run EPFO.

EPFO manages PF savings of about 4 lakh establishments with a corpus of Rs. 6.34 lakh crores as on 31, March 2015 and regulates the company-run PF trusts.

The proposed exemption for public sector undertakings or PSUs will benefit state power distribution companies making persistent losses and others such as MTNL which have been running at loss in the last five years.

But there’s no relief for private firms, including several multinational companies that suffer losses in their initial years in India.

The private sector has questioned the move and sought parity in treatment. “Nowadays, the functioning of PSUs is on par with the private sector industry. But there are PSUs that are running into losses for several years and are big defaulters. I think they should be asked to deposit a certain amount (of PF) and issued regular warnings instead of giving them a relaxation straight away,” said BP Pant, Secretary (Coordination) of the Council of Indian Employers. To ensure that private players do not move the court opposing the government’s move, the EPFO sought a legal opinion on the matter.

“…Public sector undertaking, statutory bodies and corporations fall within ambit and scope of ‘State’ as defined in Article 12 of the Constitution and there is a sovereign protection of the Trust Fund. As such, in my opinion, the proposed amendment is constitutionally valid and is not hit by right to equality,” said Amit Tyagi, EPFO’s legal counsel in a letter to EPFO. The legal opinion was shared with EPFO’s trustees (CBT) at a meeting last week.