|EPFO lessons for BJP|
|Monday, 12 December 2011 00:00|
More unreconciled EPFO accounts than members
Both the BJP and Mamata Banerjee are of the view that if new private players are to be brought in to provide pensions, a minimum return should be guaranteed. Presumably, this could be the return given by the government-run Employees Provident Fund Organisation (EPFO), which also runs an Employees Pension Scheme (EPS) where a pension equal to half your last salary is guaranteed. The two political heavyweights would do well to keep in mind that, as FE reported Saturday, EPFO has more un-reconciled accounts than it has members. Only 109.7mn of the 158.3mn accounts the EPFO’s 47.2mn subscribers have opened since they joined EPFO have been verified—there are more accounts than members since old accounts are not always closed. It could be worse—last year, ‘hidden reserves’ of R1,700 crore were discovered and this was used to raise the dividend, but rates may have to be lowered as an official says it is possible the EPFO may have dipped into 2011-12 contributions to make the payment for 2010-11 as the ‘hidden reserves’ were inadequate! The EPS’s R50,000 crore hole, similarly, is based on a small sample of account that may not be representative. If there is no clarity, it is because EPFO is the only organisation in the world to still use single-entry accounting.
Opposing the Pension Bill, as the BJP and Mamata do, will ensure millions of Indians are left to the mercy of an organisation whose accounts are suspect. Also keep in mind that private pensions will never take off since the organisation they have to compete with is fully backstopped by the government. The EPS hole will be covered by the government and one proposal now is that the government raise the interest payable on the SDS where a fourth of EPFO funds are parked, to keep the 2011-12 payout high—it’s time to implement the promise that SDS rates would be linked to GSec rates. Keep in mind that private refiners like Reliance and Essar stopped selling petrol and diesel years ago when they found they couldn’t compete with PSUs whose losses were borne by the government.
|Last Updated ( Friday, 16 December 2011 03:57 )|