EPFO trustees meeting disrupted over decision to fund senior citizen's scheme with unclaimed PF

Trade unions disrupted a meeting of EPFO trustees on Tuesday protesting against the government's decision to appropriate unclaimed PF money for funding senior citizens' welfare schemes.

Labour Minister Bandaru Dattatreya, who was chairing the meeting of the Central Board of Trustees (CBT) sought to calm down the tempers by assuring them that he would take up the matter with concerned ministers and even Prime Minister Narendra Modi. CBT is the apex decision making body of EPFO.

Soon after the supplementary agenda item on notification regarding Senior Citizen Welfare Fund was circulated for information of trustees, the trade union members walked out of the meeting in protest against the government's decision. As per the notification, "any credit balance in any of the account under the following scheme (including EPF scheme) remaining unclaimed for a period of seven years from date of its declaration as an inoperative account shall be transferred by the respective institutions (including EPFO) holding them to the Fund (Senior Citizen Welfare Fund)." Dattatreya too left the meeting midway and approached the trade union representatives to pacify them and requested them to join again.

The agitated trade union representatives told the minister that the notification of the government is not legally tenable and would not stand for long in the Supreme Court. They also said it was not appropriate for the government to take away unclaimed funds of EPFO for funding their welfare schemes as this money belongs to subscribers who can claim it at any point of time. Trade union representatives asked the minister to take up the issue with government and demanded that the CBT should move the Supreme Court to get the relief in case it is not resolved. The representative rejoined the CBT meeting, after the assurance by the minister.

"We have walked out of the CBT meeting today after they circulated a notification by Finance Ministry saying that a fund would be created from credit balance remaining in the unclaimed PF accounts" All India Trade Union Congress Secretary DL Sachdev said.

Another EPFO trustee and Bharatiya Mazdoor Sangh member PJ Banasure said the issue has been deliberated upon in the Finance, Audit and Investment Committee (FAIC) meeting of the EPFO and it has already rejected the proposal to use unclaimed EPF money for creation of any senior citizen welfare fund. FAIC had discussed the proposal after PMO wrote a letter in this regard to EPFO. 

The EPFO trustees' meet was called on Tuesday mainly to increase the proportion of body's investment in Exchange Traded Funds (ETFs) in the current fiscal. A report of an expert group on ETFs was circulated to convince the trustees about increasing proportion of these investment from five per cent of investible deposits in 2015-16. The panel constituted by FAIC has recommended that the allocation to equity can be made 10% this fiscal.

It was of the view that current allocation of 5% incremental flows to equity may not be sufficient for meaningful contribution to overall portfolio return of the EPFO. The panel pointed out that at present the EPFO's equity investment constitutes less than 1 per cent of the total corpus compared with the global average of around 30%. The experts also suggested that if the body will invest 5% of its investible deposits in equity every year then it will take 15 years for these investments to become 5% of the EPFO's total investment.

If 10% is invested into equities then it will take just five years for these investments to become 5% of the total portfolio, the panel said. However, the CBT decided to refer this report to FAIC for preparing a detailed recommendation on the issue so that it could be taken up for discussion in the next meeting. Earlier, Dattatreya had indicated that the proportion of EPFO's equity investment will be increased.

The ministry had notified a pattern of investment on April 23, 2015, which allows investment in equity and related investments from 5 to 15%. However, the CBT had decided to invest only 5% in ETFs to start with last year. Total amount invested by EPFO in ETFs is Rs 7,468 crore as on June 30. The absolute return on the investment so far is 7.45%. The EPFO is estimated to have Rs 1.35 lakh crore as investible deposits in the current fiscal.

The member of the expert group were India Index Services & Products, SBI Mutual Funds Management, LIC, Asia Index and National Institute of Securities Markets.