Union Labour Minister Sahib Singh Verma announced on Saturday that the government has lowered the interest rate on Employees Provident Fund by 0.5 per cent to 9 per cent but will still pay 9.5 per cent on EPF in the year 2003-2004.

Verma said the government will give employees a bonus of 0.5 per cent for the current fiscal as part of the golden jubilee celebrations of EPF ensuring that they get the same 9.5 per cent return despite the rate cut.

The next review of the EPF rate will be done in April 2004.

Addressing a press conference after a marathon meeting with Central Board of Trustees of the EPF and union leaders of various workers' organisations, Verma however said: "Only those who are covered under statutory guidelines will be benefit from this announcement."

This will mean that out of 30 million strong workforce in the organised sector, only 25 million will be covered under this scheme and 500,000 others will not be able to reap its benefit and will get only 9 per cent interest on their EPF.

"We will get a total income of Rs 5,844.31 crore (Rs 58.443 billion) from various investments and after paying the interest at the rate of 9 per cent we will have a surplus of 25 crore (Rs 250 million). In the past five years the there has been a surplus of Rs 2,000 crore (Rs 20 billion) from various schemes and we will pay rest of the 0.5 per cent to the employees from this fund and we will have sufficient balance even thereafter," Verma told rediff.com.

He denied that the labour ministry had taken this populist decision with an eye on elections in Delhi, Rajasthan, Madhya Pradesh and Chhattigarh.

"The elections will continue to be held but this does not mean we should not give them what is due to them. I congratulate all the union leaders and others who have helped us in arriving at a unanimous decision," he said.

Asked when did he find out about the surplus funds when sub-committee of the Central Board of Trustees had suggested that there was a loss of over Rs 100 crore (Rs 1 billion), Verma said that the reports that appeared in the media were misleading.

"I don't know where did you people get those figures. We found out about the surplus money only yesterday (Friday) and decided to give the bonus to the employees. I had met the Finance Minister Jaswant Singh and he had told me that we could give what was feasible. That is what we have done," he claimed.

Is the labour ministry planning to initiative any action against some of the private sector companies who owe money to it?

"There are three four companies, including a private sector bank who owe us money. We are in touch with the finance ministry to sort out the matter and recover our money," he added.

Will you be able to find ways and means to pay the same rate of interest next year?

"We are trying to streamline the functioning of the EPF and see how to generate better returns. This year we have got 14 per cent returns on some of our past investments and on some others we have 12 per cent or 13 per cent, respectively, and that is what enabled us to pay 9 per cent rate of interest besides giving a bonus of 0.5 per cent."

"We are also studying some schemes that are in force in countries and see how best we could protect the interests of the workers. Orders have been issued that the workers should be given advance within thirty days of their application is received. There is no need to verify. We will like to bring down this period to just two days. You will now be able to access your EPF through Internet or the phone," he said.

Even with 9 per cent interest rate, the fund will have a surplus of Rs 25.08 crore (Rs 250.8 million), A D Nagpal, Secretary of Hind Mazdoor Sabha, claimed.

The Central Board of Trustees of EPF, however, will have to incur an additional liability of Rs 323 crore (Rs 3.23 billion) for the 0.5 per cent bonus to employees.

Verma said the decision of the 0.5 per cent bonus was unanimous. "I am grateful to the union and other workers to have agreed to it."

To ensure that the employees get the maximum return, the CBT will pass on to the employees whatever return it gets on investment.

"Justice will be done and whatever returns on investment we get we will give it to the employees," he said.