Finance minister Nirmala Sitharaman on Monday defended a proposal to cut interest rate paid on employees’ provident fund deposits to over four-decade low of 8.1 per cent, saying the rate is dictated by today’s realities where interest rate on other small saving instruments was even lower.
Replying to a debate in the Rajya Sabha on the supplementary spending for the current fiscal, she said the decision to lower interest rate was taken by the central board of the provident fund managing body, EPFO, which has representatives of all stakeholders, including employee unions.
Her ministry is the nodal authority for approving the recommendation of the Central Board of Trustees of Employees’ Provident Fund Organization (EPFO).
“EPFO has a central board which is the one which takes the call on what rate has to be given…and they have not changed it for quite some time. They have changed it now…to 8.1 per cent,” the Finance Minister said.
The minister further added that it is a decision taken by the EPFO Central Board which has a wide spectrum of representatives in it.
The EPFO, earlier this month, decided to lower the interest rate to four decade low of 8.1 per cent for 2021-22. The rate was 8.5 per cent for 2020-21.
Sitharaman cited the comparative prevailing interest rates of other schemes saying Sukanya Samriddhi Yojana offers 7.6 per cent, Senior Citizen saving scheme (7.4 per cent) and PPF (7.1 per cent), while SBI’s 5-10 year fixed deposits attracted 5.50 per cent interest rates.
“With all this, the EPFO has taken a call to give it at 8.1 per cent (interest rate),” she said.
She added that for 40 years the EPFO rates have not been brought down.
“Yes, 40 years. There are today’s realities which do keep us in the context of decisions taken by the Central Board of the EPFO. It is yet to come to Finance Ministry for approval, but the fact remains that these are the rates that are prevailing today and it (EPFO) is still higher than the rest of them,” she said.
Later, the House returned a money bill moved by Finance Minister, authorising the government for payment and appropriation of certain sums from the Consolidated Fund for the financial year 2021-22. The Upper House of Parliament also returned another Appropriation Bill for the expenditure done in the 2018-19 financial year.
Both the Appropriation Bills were passed by the Lok Sabha earlier.
In her reply, Sitharaman referred to pre-IPO valuation of LIC and said that the embedded value of the insurance behemoth was calculated in an “extremely scientific way” and disclosed in draft IPO papers filed with SEBI.
The eligible policy holders of LIC will have up to 10 per cent reservation, and may get a discount on offer price, she observed.
On excess spending approval being sought, she said that the government has borne higher cost of urea, and not passed it on to farmers. “The government did not push the burden onto the farmers,” she mentioned.
Devolution of state share in central taxes is projected at ₹8.17 lakh crore in FY23, and the revised estimate of ₹7.45 lakh crore for FY22 has already been released.
“No where is devolution to States being held back by the Centre…Centre has an interest in helping states to get it in time. I take it as my duty in these times when the States are at front end getting their economy to revive and to come out of pandemic related setbacks, States need the money…,” she said.
The minister said that the supplementary demand for grants is for meeting the pressing needs of government schemes which are going for common people. Referring to excess demand for grants pertaining to the year 2018-19, she said there has been no delay involved as the time granted to get regularisation approval from House was up to June 2022.
She further said that ₹5,000 crore is proposed for recapitalisation of state insurance companies in third batch of supplementary demands for grants. This recapitalisation is linked with improvement in certain performance indicators of these companies. This will help them to reduce their losses and improve their overall financial condition, she added.
Sitharaman said that for 10 years nil defence procurement happened under UPA. “Ten years were lost… after 2014, rapidly we had to buy from pin to aircraft,” she said.
Refuting the opposition’s charges that defense allocations have come down, Sitharaman argued in the last four years there has been no reduction in outlays under any of the four major heads — civil expenditure for defense, revenue expenditure for defense, capital outlay for defense, and defense pensions.
The food subsidy provision was ₹2.43 lakh crore in 2021-22, while the revised estimate stood at ₹2.87 lakh crore, she said adding that the government has, without any hesitation, made suitable provisions whenever food subsidy requirements are more than budget estimates.
For the next year, the outlay has been pegged at ₹2.07 lakh crore, she said.
Similar to the food subsidy, the outlay under fertiliser subsidy covers the gap between issue price and economic cost, Sitharaman emphasised.
“When issue price, to the farmers, of fertilisers has not been changed, there can be no adverse impact on farmers,” she said.
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