Lakhs of employees may find themselves in the lurch soon,
as Employees Provident Fund (EPF) trusts in India
face debt defaults by state governments and other government
EPF, the Coal Mines EPF and the Seamens EPF have
Rs 7,000 crore in state guaranteed bonds, which are due
to mature this fiscal. However, cash-strapped state governments
are likely to ask for a rollover on these payments.
90 per cent of the entire PF amount of over Rs 45,000
crore is invested in government guaranteed bonds and paper,
and the remaining 10 per cent in stocks. About 45 lakh
employees are covered under the tax-exempt EPF trusts.
from this, over 3,000 companies manage PFs independently,
handling investments to the tune of Rs 35,000 crore. Of
this, an estimated Rs 8,000 crore has been invested in
state government guarantee bonds. As per investment norms,
up to 35 per cent of the PF corpus can be invested in
Reckon V, a Mumbai-based pressure group representing companies
and debt brokers, has informed the central labour ministry
about the alarming situation. According to Force Reckon
officials, seven states, including Maharashtra, Gujarat
and Kerala, have defaulted on interest payments; more
are likely to follow suit.
Maharashtras internal debt has reportedly multiplied
five times to Rs 27,105 crore in the last two years. A
Reserve Bank of India study says the aggregate outstanding
guarantees for 17 major states in India have risen from
Rs 40,318 crore in 1992 to Rs 1,05,739 crore in the year
the last six months, Maharashtra Krishna Valley Development
Corporation defaulted on interest payments of Rs 74 crore.
The credit rating agency Crisil reacted to this by placing
a ratings watch on Vidarbha Irrigation Development Corporation,
Konkan Irrigation Development Corporation and Tapi Irrigation
Development Corporation. The sum they have raised is over
Rs 2,100 crore, of which a major part is investments from
not all. Industrial Finance Corporation of India defaulted
on a Rs 80-crore payment to the Coal Mines PF and the
EPF in April-May 2002. This is in addition to its earlier
default on statutory liquidity ratio bonds this March
and the numerous rollovers and reinvestments to the tune
of Rs 500 crore that it has already received from banks
and institutional investors.
has warned the states that if the investors invoke the
guarantees on bonds now, the states will face a debt liability
of Rs 40,000 crore in the next five years.