To take your ideas to Policymakers, Join the Campaign of #PolicyPulse Write to feedback@policypulse.com

Govt rolls back PF withdrawal rules: Important points

The decision marks the government’s second u-turn on changes to the pension fund

Policy Pulse
Publish Date: Apr 20 2016 12:04PM | Updated Date: Apr 20 2016 12:04PM

Govt rolls back PF withdrawal rules: Important points

The government withdrew its new rules on provident fund withdrawal under fire from political opponents and bowing to pressure from trade unions, on Tuesday.

 

Within hours of announcing the decision to withhold the rules till July 31, labour minister Bandaru Dattatreya declared that the proposed move has been rolled back.

 

“We are cancelling the notification issued on February 10. The old system will continue,” he told a press conference in Hyderabad on Tuesday night - his second there in the issue in less than five hours.

 

Dattatreya said the employees, whenever they want, can withdraw employer’s contribution of 12%.

 

The decision marks the government’s second u-turn on changes to the pension fund. In March, the government withdrew a plan to tax EPF withdrawals after an outcry from salaried workers.

 

Here is the important points to know about the controversy:

 

*The BMS on Tuesday said they will continue to protest till all restrictions on PF withdrawal were removed. The government decision came in the wake of protests by garment workers in Bengaluru to press for removal of such curbs.

 

*In a spurt of violence, garment workers, protesting the new Provident Fund rules, set afire several vehicles and attacked a police station. The spontaneous stir, with no trade union leading it, spun out of control on the second day as protesters went on rampage pelting stones at Hebbagodi police station and torching seized vehicles parked there. Police had to resort to lathicharge and fire teargas shells to disperse violent protesters.

 

*According to the government, the protestors were migrant workers, who work for two to three years at one place and then migrate.

 

*Officials said about 25 policemen, including an Assistant Commissioner of Police, suffered injuries in the violence and they are undergoing treatment at a hospital. At least two Karnataka State Road Transport Corporation buses and one of Bengaluru Metropolitan Transport Corporation were set on fire.

 

*Incidents of stone-pelting on buses and other vehicles were reported from different parts of Bengaluru such as Bannerghatta and Jalahalli cross, as also near the Electronics City, the hub of IT firms. Traffic jams were reported at various entry and exit points in the city like Hosur Road, which leads to Electronics City and Tumkur Road, which has a large concentration of garment units.

 

*Workers opposing amendment to Employees Provident Funds and Miscellaneous Provisions Act expressed fear that the new rule would take away their right over the employer’s contribution of provident fund till they attain 58 years.

 

*Following the concerns raised by trade unions and other stakeholders, the ministry had earlier decided to keep the notification in abeyance. The unions however wanted a complete rollback of the decision tightening the PF withdrawal norms. The scrapping of the notification would mean that the EPFO subscribers who are out of job for more than two months can file for full and final settlement of provident fund.

 

*Trade union leaders said that they are of the view that the curbs on withdrawal are unnecessary as the quantum involved is just 3.67% of the employer’s contribution.

 

“It is an unwanted and unnecessary decision. All the trade union representatives in the board of trustees had opposed the move. Even a couple of employer’s representatives were in agreement with our views,” said Centre of Indian Trade Union (CITU) president and CBT member AK Padmanabhan. According to him, it is a confusion created by the bureaucracy and there is no rationale for restricting the withdrawal.

 

*In February, the labour ministry had issued a notification restricting 100% withdrawal of provident fund by members unemployed for more than two months. The earlier decision was then deferred till April 30 but as protests persisted, the government decided to postpone it yet again. The EPFO had also restricted withdrawal of PF to the employee’s own contribution and interest earned on that, if the claimant has remained unemployed for more than two months.

 

*According to the new norms proposed earlier this year, subscribers are not to be allowed to claim withdrawal of PF after attaining 54 years of age, and would have to wait till 57. Earlier norms allowed contributors or subscribers to claim 90% of their accumulations in their PF account at the age of 54 years, and the final claims to be settled just one year before their retirement.