Unions to oppose increased investment in equity

Trade unions are unanimous on opposing any proposal changing the investment pattern in equity market. All trade unions including Bhartiya Mazdoor Sangh (BMS) which is the trade union wing of the ruling Bharatiya Janata Party (BJP) said that any proposal to increase the quantum of investment in equity markets According to unions, during the last meeting of the Central Board of Trustees (CBT), the ministry had produced figures which clearly showed that the return on equity was going down.

"Since the return was going down, we demanded a complete roll back of the decision, the ministry promised there will be an enquiry by the Financial Audit and Investment and Committee (FAIC), in spite of that if they go for increasing the quantum now, it will be foolish," said D L Sachdeva. An analysis by EPFO found that it has earned a negative return of 9.54 per cent on its Rs 5,920-crore investment in exchange traded funds (ETFs) since August last year, prompting labour unions to demand rollback of the decision to park funds in stock markets. A spanner in the government's plan could be the vehement opposition from Bharatiya Mazdoor Sangh. 

"We are totally against it. In the first phase too we opposed the decision as equity is a risk market, as and when any such proposal will come up we will oppose it," said Virjesh Upadhyay, national secretary, Bhartiya Mazdoor Sangh. However, when asked about it Shankar Agarwal, secretary, Ministry of Labour said the ministry of the view that returns on investment in equity gives healthy return on a long term. " 

A decision on this respect will be taken only after consultations with the CBT but decisions should not be taken based on such short time," he said.Yesterday minister Bandaru Dattatreya, said that EPFO may increase the quantum. "Naturally it will go higher. We have called portfolio managers and stock analysts and seen their presentation. We will put forward their recommendations in the CBT meeting," he said when asked if there will be any change in investment pattern by EPFO. 

The finance ministry had last year notified a new investment pattern for EPFO, allowing the body to invest a minimum of 5 per cent and up to 15 per cent of its funds in equity or equity-related schemes. However, the EPFO management decided to invest 5 per cent of its incremental deposits in ETFs only during the last year, the minister added. But an analysis by EPFO found that it has earned a negative return of 9.54 per cent on its Rs 5,920 crore investment in exchange traded funds (ETFs) since August last year, prompting labour unions to demand rollback of the decision to park funds in stock markets.

The market value of investments of Rs 5,920 crore in the ETFs in the current fiscal was Rs 5,355 crore on February 29, 2016, as per an analysis of equity investment by the Employees' Provident Fund Organisation (EPFO).