Money from EPFO invested in 'safe' funds: Govt

The workers' money in EPFO has not been diverted to stock markets but it is invested in funds which are safe and profitable, the government said in the Rajya Sabha.
Replying to a Calling Attention Motion of Ahmed Patel (Congress), Labour and Employment Minister Bandaru Dattatreya asserted that his "paramount interest will be safeguarding of the workers' interest."
Patel's motion was on the alleged diversion of money from Employees Provident Fund (EPF) to stock market.
Describing the allegation as "totally incorrect", Dattatreya said, "There is no question of diverting funds. This government is pro-poor, pro-worker and pro-progressive... We have made (investments) in Exchange Traded Funds (ETFs) and not in share markets."

ETF is a fund which holds several assets such as stocks, commodities or bonds and most ETFs track an index like a stock index or a bond index.
With regard to the pattern of such investment (pension funds in ETFs) and in long term investments with equity participation, he said the interests are "positive and encouraging".

"This worldover pattern is giving positive returns. These funds (equity funds) are generally for 10 years or more period, so that's why this will give encouragement in a positive direction and in a profitable manner," he said.
He assured the House that the government is maintaining a "cautious approach" and is "more concerned" about the workers' money in the EPFO.

"The indications are positive and we are in the right direction," Dattatreya said.
On the quantum of investments in ETFs, he said a March 2, 2015 notification by the Finance Ministry had prescribed minimum 5 per cent of the investible deposits and maximum 15 per cent in ETFs.
Besides, the Para 52 of the EPF Scheme, 1952, mandates that the investment will be made in accordance with the notification of the central government.
Of the total amount, 75 per cent is being investment in Nifty and the remaining 25 per cent in BSE, he said.
"In Nifty there are 50 baskets and in the BSE, 30 baskets. The funds are not invested in individual shares," he added.

The total amount invested, so far, is Rs 7,468 crore and its current market value is Rs 8,024 crore, which is an interest of 7.45 per cent, the Minister said.
"Earlier only SBI was investing it, but now to increase competition, we have also allowed UTI," he added.
Assuring about the safety of the funds, Dattatreya said:
"These are social security amounts and that too workers amount. I, as head of the apex decision making body of the EPFO, Central Board of Trustees (CBT), my paramount interest will be safeguard of the workers interest."
Patel said the minister's reply was "not satisfactory" as he had not clarified on his question of "minimum guarantee".

"The minister has also not replied on T K Rangarajan's (CPI-M) question on how can they invest a worker's contribution without taking his or her consent," he added.
Patel told Deputy Chairman P J Kurien that he wants to move a resolution against the government under Rule 167 stating that the House "Strongly disapproves of" the government's move to invest EPFO money in ETFs.
To this, Kurien said: "If you want to move a resolution, you have to give a notice. Please give the notice under the concerned rule. At this point, I am not allowing you to move the resolution."

Naresh Agrawal (SP) asked whether a notice can be served orally, to which Kurien replied that a notice has to be given in writing.
After Dattatreya's reply, Tapan Kumar Sen (CPI-M) wanted the minister to clarify on whether the government has followed the recommendations of the statutory tripartite body on the investment by the EPFO in ETFs.
(Reopen PAR24)
Earlier, opposition parties attacked the government over raising the investments of EPFO in stock market through ETFs).
Patel charged that the government was playing with the hard-earned money of employees and labourers.
He asked whether the government was willing to give a guarantee on the returns to be earned from the stock market.

Patel said investing money in the stock market has proved to be a loss-making exercise as the return was 7.45 per cent compared to 8.8 per cent offered under the scheme.
Tapan Kumar Sen of the CPI(M) termed the issue as "very serious" and asked the government not to go ahead with the decision to invest 15 per cent of EPF money into the stock market from the current 5 per cent.
"I want to draw your attention, money in EPF belongs to workers. Don't play with lifetime savings of workers. Please stop it otherwise workers will make you understand in the language you prefer to hear.

"Central Board of Trustees have already said we don't want any extra return. You are telling 7.45 per cent in one year. In first 10 months the loss was Rs 400 crore," he said.
"Whenever any collective fund is put in speculative market, global experience is of loss," Sen said, adding that in countries like US, Britain and Japan, the governments provide guarantee of returns on such investments.
Shantaram Naik (Congress) termed it as "dacoity", saying the government was indulging in gambling with employees money.
The government has no right to encroach on labour money, he said and quipped, "I hope they don't send officers to Goa for gambling to get better returns."

He, however, welcomed the government's move to set up a fund for senior citizens.
D Raja of the CPI (M) too said the government should not "gamble" with workers' money.
"Money in EPF is workers money. It is meant for their future after retirement and also for the safety of their families if something happens. I am asking why don't you invest money in government-approved securities," he said.
Stating that investing in stock market is risky and a gamble, Raja said the government's decision to invest a higher amount is "anti-worker" and no trade union has accepted it.
(Reopen PAR26)

Derek O'Brien of the TMC said, "The root of the problem is that I suspect that you are trying to use the American model. American model has independent retirement fund and social security account which we don't have."
Moreover, he said that even in American model they invest in low-risk municipal bonds while India has a shallow market and shallow bonds.
"I am sure labour Minister will not allow. This is hard-earned money of employees," O'Brien said, seeking to know the companies in which the EPF money was being invested by the 4-5 designated banks handling it.
TKS Elangovan (DMK) requested the Labour Minister to protect the employees.

Alleging that Finance Ministry is catering to corporates, he said: "We are opposing investments in stock markets. We want safe investments. Do not play with the lives of workers".
Satyanarayana Jatiya of the BJP said without any guarantee (of return), investing in stock market is risky.
He said it is the responsibility of the government to secure the future of the employees.
Vijil Sathyananth (AIADMK) said her party was "strongly opposed" to diverting EPF money to stock market.
Veer Singh (BSP) wanted to know under what circumstances government is investing money into stock market and what is the guarantee of return on such investments.

Harivansh (JDU) said it is not safe to put the EPF money into stock market. "At a time when we should have been increasing social security we are putting money in stock market. This is wrong," he said, terming it as suicidal".
Dilip Tirkey of BJD said investing in stock market is risky and asked whether there was a provision for minimum guarantee on such investments.
Criticizing the move, Naresh Agarwal (SP) said: "If Sensex comes down, then what will happen. If share market falls, a lot of money will be lost. Who will take guarantee?"
He asked the government to crack down on private companies not depositing their PF contribution.

KTS Tulsi (Nominated) said investment in stock market has opposed by all trade unions including Bharatiya Mazdoor Sangh.
"They (unions) have said that it is daylight robbery and misappropriation of funds... Workers don't know much about investments. There is a negative return. Workers are left high and dry," he added.
Rajiv Shukla (Congress) sought to know what precautions and safety standards had been taken by the government so that the money is not sunk.
Digvijaya Singh (Congress) called the BJP-led government as "anti-Dalit, anti-worker and pro-capitalist".
"There is no guarantee in case of losses," he said, while charging that the government has certain commitments for the corporate sector.

Ananda Bhaskar Rapolu (Congress) asked why the government was after PF money. "You cannot deterine the future of workers. I am full of compassion for workers," he said.
Madhusudan Mistry (Congress) charged that the government is strengthening capitalist system by raising the investment limit in stock market.