Minimum monthly pension for members of EPF could soon increase to Rs 1,000

The embattled UPA government is set to give a bonanza to 60 million workers in the organised sector. The minimum monthly pension for members of the Employees' Provident Fund (EPF) could soon increase to Rs 1,000.

Currently, most EPF pensioners receive less than Rs 500 a month, but for some it is as low as 4 and 12. Union Labour Minister Mallikarjun Kharge has sought immediate measures to enable the first revision in workers' pension income in 11 years - an annual bonus was last doled out in 2000.

Employers contribute 12% of workers' salaries to their EPF accounts, over two-thirds (8.33% of the salary) of which is diverted to a pension scheme, subject to a maximum of Rs 541 a month. The government chips in with a subsidy of 1.16% of salaries (for a maximum of Rs 6,500 a month) for this pension scheme - launched in 1995, when Manmohan Singh was the finance minister.

Apart from pension benefits to workers, the Employees' Pension Scheme (EPS) of 1995 also offers pension on disablement, widow pension, and pension for nominees, parents, children and orphans.

On Wednesday, Kharge met seven trade union leaders to discuss a proposal to enhance the scheme's contribution rate by 0.63% from the present level of 9.49% of salary, in order to fund a minimum guaranteed pension of Rs 1,000 a month.

The minister is expected to hold a similar meeting with employers, before taking the idea to the central board of trustees of the Employees' Provident Fund Organisation (EPFO) for ratification.

"The key issue we discussed was how the 0.63% increase in contributions can be funded to ensure a thousand rupees' pension," All India Trade Union Congress general secretary DL Sachdeva told ET. "We initially suggested that it could be shared by the government and the employer, but we know the fiscal position of the government," he said, adding, "So expecting the government to pay could only delay the proposal indefinitely." Sachdeva cited the finance ministry's refusal to implement a two year-old board decision to provide EPF cover to firms employing 10 workers or more, from the current threshold of 20 workers.

"The pension scheme has not paid out any inflation relief to pensioners since 2000, so this is a good move. We hope employers agree to raise the contribution rate," Hind Mazdoor Sabha general secretary and EPFO board member AD Nagpal said.

The parliamentary standing committee on labour had, in February 2009, criticised the government for failing to revise the contribution rate even after one and a half decades of the scheme and said this 'speaks volumes about the callous attitude of the government towards the workforce'.

An experts committee was set up later that year to review the scheme as it had run up an estimated deficit of around Rs 54,000 crore. The committee, in its report submitted last year, suggested several alternatives to plug the scheme's deficit and raise benefits - albeit with a significant hike in contributions.