Is govt trying to snatch workers' savings? Uproar over Fin Min's plan

Govt trying to snatch workers' savings?

The Finance Ministry has decided, suo motu, to utilise unclaimed PF and EPF accounts that have been lying dormant for seven years, and divert the funds into the SCWF.

The rules notified by the Finance Ministry are binding upon the Labour Ministry, which has been a cause of discontent for the latter.

While some in the Labour Ministry believe that there is no issue in investing or using part of the PF corpus for various welfare schemes, others believe the Finance Ministry has no right or say to take decisions with respect to workers' savings.

A senior Labour Ministry official, however, defended the move. "It isn't as if any claimant will be denied their money. Every claimant will get their money back, whenever he needs it, along with interest. Just like any bank, when a person does not claim any money for a period of seven years, it is believed that they are not available. I don't see any issue with this money being used for the welfare of the people. Neither the claimant nor the EPFO is suffering."

However, not all within the ministry hold the same view. "The government has no right to encorach into the savings of millions of workers. This is the only social security net we have. There is a good chance this could be rolled back in the next CBT (Central Board of Trustees) meet. This issue is now being discussed in the Prime Minister's Office," said another official within the Labour Ministry.

The CBT is a statutory body constituted by the Central government which is in charge of the administration of funds vested with the board. This includes all PF accounts, including changes in investment, as well as rate of interest to be credited into the accounts of PF members.

The Labour Ministry has also written to the Finance Ministry raising objections to the move.

Other diversions

Earlier this week, the CBT met to discuss raising the investment limits in Exchange Traded Funds (ETFs) from 5% to 15%. ETFs are funds that are arguably a bit safer to invest in than stocks.

The CBT, however, could not reach a consensus with trade unions and other stakeholders, who have voiced their concerns about raising rates. Many central trade unions had walked out of the meet.

The issue isn't just the diversion of money into the SCWF. According to officials, the government is looking at encroaching into the EPFO's unclaimed corpus to partially fund various government schemes, including Swachh Bharat, Housing for All and other schemes.

So, it isn't just concern over investing the savings of millions in equity markets, but also of diverting funds into various government schemes. Or, as an official from the EPFO calls it, "hijacking the workers' money".

The Finance Ministry, however, has stated in its notification that it "shall try to contact" every account holder about the unclaimed deposits through mailed notices, e-mails or telephone, before any transfer of the PF amount to the SCWF.

Unions protest

One of the stakeholders in the CBT are the Central Trade Unions (CTU). Out of the 42 member groups withing the CBT, 10 are CTUs, forming a very small yet vital section of stakeholders within the CBT.

CTUs have made it clear that they would do all they can to reverse the government's decision on diverting funds. "It is not their money, and they should realise that. The CBT is in charge and responsible for the money. It is an autonomous body," said Vrijesh Upadhyay, national secretary, Bharatiya Mazdoor Sangh.

"I'm glad that the government has thought of starting a Senior Citizen's Welfare Fund, but a separate budgetary allocation should be made for it, rather than relying on employees' savings," he added.

Upadhyay also explained that this is more dangerous than just investing in equity, as there is no assurance of any interest if you invest in government schemes which could fail.

"PF rules say if there is a person whose money is left unclaimed, like in the event of the death, the money should then be transferred to the nearest kin. It doesn't belong to the government. We would be betraying the people," he added, stating that the unclaimed money amounts to about Rs 24,000 crore.

However, a Labour Ministry official rebutted Upadhyay's comments. "The unions don't understand the issue. They are stakeholders, but the law was passed by an act of Parliament. Parliament has deemed it reasonable," the official said.

Until now, for the common employee, there seems to be not much cause of worry with respect to getting his or her PF money back.

Nonetheless, to encroach on the worker's money and invest it in government schemes might not be the wisest thing to do.

Edited by Shreyas Sharma

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