The Narendra Modi-led government has dropped a plan to enlarge the social security net for nearly six million organised sector employees in an attempt to ease the burden on the government exchequer. The labour ministry has decided not to act on a proposal approved by the central board of Employees Provident Fund Organisation (EPFO) – India’s state pension fund – to increase the salary threshold from up to Rs 15,000 to Rs 21,000 per month to bring more workers under mandatory EPF coverage and give them PF and pension benefits, reported the Mint on Monday.
The report further highlighted that the decision of not raising the wage level may not go down well with workers’ unions at a time of rising anti-government protests across the country. The newspaper quoted Union Labour and Employment Minister Santosh Gangwar as saying, “It has not moved . right now there is no proposal from our-side . I cannot comment anything more on this.” At present, all workers drawing a monthly salary up to Rs 15,000 are covered mandatorily under EPF and the Employees’ Pension Scheme (EPS) social security benefits.
Last year, the central board of EPFO had okayed a plan to increase the salary cap from Rs 15,000 to Rs 21,000. However, the increase in the salary cap would have cost the Modi government up to Rs 3,000 crore per year. The EPFO hiked the salary threshold from Rs 6,500 to Rs 15,000 in August 2014.
“Yes, the central board had recommended hiking the salary threshold,” V P Joy, the central PF commissioner without elaborating on why the plan has been shelved, told the financial daily.
The Centre pays 1.16 per cent of the basic wages to each EPFO subscriber earning less than Rs 15,000 a month towards employees’ pensions.
Meanwhile, Gangwar has said that there is no disagreement with the North Block on providing 8.55 per cent rate of interest for 2017-18 to over five crore subscribers of retirement fund body EPFO.
In February, the EPFO cut the interest rate for the financial year 2017-18 to a five-year low of 8.55 per cent. The rate was trimmed by 10 basis points from last year’s rate of 8.65 per cent. This is the third straight year that the provident fund organisation has cut the interest rate. The EPFO manages a corpus of over Rs 11 lakh crore.