With the point-to-point inflation rate having shot past the 7 per cent mark, the government has a problem on its hand in attempting to cut the rate of interest on the deposits with the Employees Provident Fund Organisation.
The crucial meeting of the Central Board of Trustees of the Employees Provident Fund Organisation to decide on its applicable rate of interest for 2004-05, is slated for Monday.
According to government officials, there will be now be a renewed pressure from the trade unions to avert any cut in the rates of interest from the existing 9.5 per cent, stating that the real yield on the savings of the 2.4 crore (24 million) private sector employees was now less than a year ago.
The finance ministry and the Prime Minister's Office has been pressing the Employees Provident Fund Organisation to set a rate of interest on the deposits that are in consonance with the market rates of return on government securities. But with the rate of inflation having turned northwards, they will face a strong opposition from the various trade unions against any rate cut at the meeting.
The finance ministry has held that of the total rate of interest, 0.5 was a golden jubilee bonus, which cannot be continued in the current year. The members of the Central Board of Trustees of the Employees Provident Fund Organisation should therefore be ready to accept the 9 per cent as the applicable rate, it has argued.