The pro-market and pro-labour faces of the Modi government are coming into conflict over the tenability of an interest rate of 8.65 per cent for subscribers of the employees’ provident fund organisation (EPFO) for 2016-17.
The rate of interest was fixed in February, prompting the finance ministry to seek clarifications from the labour ministry, mainly pertaining to the EPFO’s ability to pay an interest rate of 8.65 per cent and the payouts to be made in case of inoperative accounts. In its reply, the labour ministry had justified the payout.
The finance ministry is now learnt to have written to the labour ministry recommending a possible cut in the rate upward of 50 basis points, questioning the tenability of interest payouts by the retirement fund body, especially with regard to the liability of the central government in case the EPFO is unable to provide for the payments.
But with crucial assembly elections in Uttar Pradesh out of the way now, the government has started displaying a new aggression in its policy formulations. It has decided to take a fresh jab at reforms without the fear of annoying voters.
The finance ministry has been asking the labour ministry to bring the EPFO interest rate in alignment with other small savings schemes as it continues to be the fixed income instrument with the highest return. The finance ministry has cut interest rate for all small savings schemes by 10 basis points for April-June, except interest r