Brushing aside strong opposition from the unions, labour Ministry on Thursday doubled EPFO’s investment limit in ETFs to 10 per cent that will result in Rs 13,000 crore of the retirement fund body flowing into stock markets in the current fiscal. It has raised the limit of investments by the Employees’ Provident Fund Organisation (EPFO) in the Exchange Traded Funds (ETFs) in 2016-17 to 10 per cent of investible income from 5 per cent in 2015-16.
“We have already issued a notification raising the EPFO investment limit of ETFs to 10 per cent from the current 5 per cent of its investible deposits,” labour Minister Bandaru Dattatreya told reporters at a press conference here. EPFO has already invested Rs 1,500 crore in ETFs in the first half of the current fiscal and will invest about Rs 11,500 crore in the remaining six months.
When asked whether labour Ministry has sought the EPFO trustees’ approval, Dattatreya said: “The issue was discussed twice in the CBT meeting. Some members had reservations against the ETF investments.” Asked whether CBT approval is not required, labour Secretary Shankar Aggarwal said: “Government (labour Ministry) is over and above the board.” He was of the view that when the CBT is not able to take decision on a issue then the labour Ministry is appropriate government as per law (EPF Act) to take a decision for the benefit of the workers.
However, the trade unions have slammed the labour Ministry for taking a ‘unilateral’ decision without approval of the EPFO trustees. They have been opposing investments by EPFO in the stock markets in view of their volatile nature and had been unanimous on the issue. All India Trade Union Congress Dl Sachdev told PTI: “We strongly oppose this unilateral notification by the Government to double FPO investments in ETFs despite our reservations. We will would soon discuss the issue with other unions and launch a protest against this move.”
Indian Trade Union Congress Vice-President Ashok Singh said, “This is not the right approach. What was the emergency to do it and if it is done then what is the sanctity of the Central Board of Trustees headed by labour Minister which is the apex decision making body for the EPFO.” Talking to reporters, Dattatreya said: “We decided to raise it to 10 per cent keeping the good economic situation, ground conditions and how social security funds invest globally. We are custodians of workers money and our responsibility is to see they get good returns.” In 2015-16 fiscal, he said, the experience is ‘very good’ and EPFO invested Rs 6,577 crore in the ETFs.
“In the last one year, the rate of return on investments was 13.24 per cent, and at the same time our rate of returns in other securities is declining,” he added. The Finance Ministry had last year notified a new investment pattern for EPFO, allowing the body to invest a minimum of 5 per cent and up to 15 per cent of its funds in equity or equity-related schemes.
