The government's decision to raise moribundinterest rates on small savings instruments like thePublic Provident Fund(PPF)and National Savings Certificates has triggered a clamour for a similar ratehike on the retirement savings of about eight crore government and organisedsector workers.
From December 1,PPFdeposits will earn interest at 8.6%, while a10-year National Savings Certificate will yield 8.7%. The PPF rate had been at8% since 2003-04, but with inflation hovering around double-digits and bankdeposits paying more interest in recent times, small savings inflows had turnednegative this year.
While voluntary investments in PPF and NSCs have been mademore attractive, interest rates on two mandatory savings instruments, theGeneralProvident Fund(GPF) and the Special Deposit Scheme (SDS), remainunchanged at 8%.
Traditionally, the interest rate on the GPF, where around 1.5 crore governmentemployees invest part of their salary, and the SDS, move in sync with the PPFrate. The SDS, a quaint scheme launched in 1975 and closed for freshinvestments in 1997, holds around Rs 1,10,000 crore of investments fromretirement funds like theEmployees' Provident Fund Organisation, Seamen'sProvident Fund and Coal Miners' PF.
These provident funds together provide a social security net to around 6.5crore formal sector workers. "Since the government is raising interestrates across schemes, we have requested them to raise interest rates on theSpecial Deposit Scheme (SDS) where a large chunk of employees' social securitysavings are parked and are earning just 8%," Rajya Sabha member Tapan Sentold ET.
"There's no logic against raising rates as the government can'tdiscriminate between similar savings," he added. Sen has asked Labourminister Mallikarjun Kharge to take up the demand immediately with FinanceMinister Pranab Mukherjee.
"Since the interest on SDS is credited to provident funds on January 1,every year, prompt action for revising the interest rate can also boost the PFinterest rate for 2011-12," the MP's letter stressed. All India TradeUnion Congress general secretary and Lok Sabha MP Gurudas Dasgupta has alsourged Kharge to act fast on the issue, reminding him that employeerepresentatives on the EPFO's board had been seeking an upward revision in SDSrates for a long time, so that workers get better returns on their providentfund savings.
The government employees are also preparing to corner the Centre over the PPFrate hike. All India Railwaymen's Federation general secretary Shiv GopalMishra said that they have been demanding that theGPFrate should beon par with the EPF rate, which was 9.5% in 2010-11.
"Now, if they don't even bring it in line with the PPF rate, it would begrave injustice to government workers," Mishra said.
Source : Economic Times