EPFO interest rate reflects reality; is still better than other schemes: FM

The reduction in interest rate offered by Employees’ Provident Fund Organisation (EPFO) to 8.1 per cent reflects ‘today’s realities’ and is still higher than interest on small savings schemes and bank fixed deposit rates, finance minister Nirmala Sitharaman said on Monday.

“EPFO has a central board which is the one which takes the call on what rate has to be given for them, and they have not changed it for quite some time...they have changed it now ... to 8.1 per cent," she said, adding that the proposal is yet to come to the finance ministry for approval. Sitharaman was giving a reply to a discussion on Appropriation Bills in the Rajya Sabha.

The central board has proposed to slash the PF rate to 8.1 per cent for FY22 from 8.5 per cent in FY21 and FY20, the lowest in four decades.

Rates offered by other schemes such as Sukanya Samriddhi Yojana is at 7.6 per cent, senior citizen saving scheme is at 7.4 per cent.

“The fact remains these are rates which are prevailing today, and it (EPFO interest rate) is still higher than the rest,” she said.

Sitharaman further said that the government may offer a discount to policyholders of Life Insurance Corporation of India subscribing to the insurer’s IPO. The government has reserved 10 per cent of the issue for eligible policyholders, and they may also get a discount on the issue price, Sitharaman said in the Parliament Monday.

LIC’s embedded value has been calculated in a scientific way, and has been disclosed in the draft red herring prospectus (DRHP). The IEV is an actuarial metric and is based on the value of in-force business, Sitharaman said. LIC’s EV has been pegged at Rs 5.4 trillion as on September 30, in its DRHP.

On excess spending approval being sought via supplementary demand for grants the minister said that spending was done under certain schemes to meet the pressing needs of the common man.

“The fertiliser subsidy is Rs 14.092 crore and indegenous urea subsidy is Rs 8.270 crore (included in fertiliser subsidy). Last year, there was a spike in the price of urea and we imported it at a higher cost. The government did not push the burden on farmers. The entire hike in the cost was borne by the government. The farmers did not have to pay one extra paisa,” she said.

As much as Rs 10,260 crore was spent for labour and employment, which will be for contribution towards employees pension scheme, 1995. Similarly, Rs 9,068 crore is  being spent by the rural development ministry, towards PM Aawas Yojana.

Sitharaman also said that the devolution to states was not being held back by the Centre. Devolution of state share in central taxes is projected at Rs 8.17 lakh crore in FY23, and the revised estimate of Rs 7.45 trillion for FY2021-22 has already been released.  As much as Rs 5,000 crore is proposed for recapitalisation of state insurance companies in the third batch of supplementary demands for grants.