Labour unions seek higher returns on SDS for better EPF yield

NEW DELHI: Labour unions will press the finance ministry for measures to increase returns on employee's provident fund on a sustained basis. They will also demand bringing enterprises with more than 10 employees within the purview of the EPF organisation at the pre-budget meeting later this month.

"Most of the issues that will be taken up are pending for some time. We will meet next week to finalise our list of demands before we make our presentation to the finance ministry," said AK Padmanabhan, president, Confederation of Indian Trade Unions. The finance minister will meet representatives from registered trade unions on January 16.

They would demand re-activation of the special deposit scheme ( SDS), where more than one-fourth of the EPF money is parked, and to increase interest rates on it.

"We not only want higher EPF returns this year, but want to ensure that returns are stabilised over the years. For that it is important that the rate of interest on SDS, which is money borrowed by the government, is increased and fresh deposits are permitted," said DL Sachdev, secretary, All India Trade Union Congress.

Trade union representatives are demanding that interest rate of SDS, which was slashed to 8% in 2003-04 from 12%, should be increased to 9.5%. They also want fresh deposits in SDS to be allowed again so that share of EPF money going into the fund increases from the present 30% to earlier over 70%.

The finance ministry, however, is not keen to hike interest on SDS. "There is no justification behind the demand," a government official told ET.

Labour unions and the government have locked horns on the interest rate on EPF for next year with workers demanding that returns should be at the current level of 9.5% and the EPFO proposing that it should be brought down to 8.25% to make up for an error in calculation that resulted in a higher payout last year.

Labour unions will also press the finance ministry to implement the decision to reduce threshold limit for establishments covered under the Employees Provident Fund Act from 20 employees to 10 employees.

It will bring millions of employee's under social security net of the EPFO and will also increase burden on the finance ministry that contributes 1.16% of the basic salary of each employee to the fund.