Singh defends EPF rate cut, snubs populism / Dec 12, 2005 / The Economic Times
From Indiapensions
Singh defends EPF rate cut, snubs populism
CL MANOJ
ON BOARD PM’S AIRCRAFT: Prime Minister Manmohan Singh on Sunday indicated his unwillingness to entertain populist bail-out package to appease the political demand for rolling back the recent decision to bring down the EPF interest rate to 8.5%.
Ruling out the possibility of extending additional budgetary support to the EPFO, Mr Singh made it clear that the decision on whether to hold on to the new rate of interest has to be taken by the EPFO, purely on the basis of the organisation’s economic muscles to sustain the interest rate.
In short, if the EPFO decides to give in to the political pressure to a roll-back the decision to cut the interest rate cut, then the onus will be on the EPF board to raise additional resources to maintain a higher rate of interest. By taking this position, the prime minister seems to be placing before the opponents of lower rate of interest an option of either agreeing for reforms in the fund management of the EPFO or accept the reality of its presently limited options.
Asked about his comment on the reduced rate of EPF interest rates and the opposition to it, Mr Singh told reporters accompanying him: “It is not a question of me being satisfied or dissatisfied (with the new rate of EPF interest). It is a question of what he EPF Organisation can afford. We need the organisation to be strong — financially and make sure that they declare interest rates which they can sustain. If they can sustain a higher rate, I will be happy.”
The prime minister’s ruling out extending additional budgetary support to the EPFO is significant as it was through that option that the government had rolled back last year’s decision to reduce the EPF interest rate and brought it back to the 9.5%.
The Left and trade unions which are back to opposing the cut in the EPF rate have been hoping a similar bail-out this time too. Addressing the Indian Labour Congress in Delhi on Friday, the prime minister had responded to the trade union protest to the reduced rate of interest by saying that he would soon meet the labour minister and other concerned officials to discuss the issue.
