EPFO panel’s time-buying tactics block reform
Indian Express

INVESTING PF money: Tasked with ending SBI monopoly, Finance and Investment Committee tried to rope in ex-chairmen, rebuffed

While Finance Minister P Chidambaram recently expressed hope of pushing through some of the unfinished financial sector reforms agenda in the UPA Government’s remaining tenure, there is one area of pension reforms where there has been no progress despite the authority concerned giving its nod in March 2006.
While the Labour Ministry has been unable to convince Left trade union members on the board of the Employees’ Provident Fund Organisation (EPFO) to allow even 5 per cent of EPFO’s money to be invested in the stock market to deliver higher returns the unions keep demanding, it did succeed on another front—abolishing the State Bank of India’s monopoly in managing EPFO’s investments.
On March 28, 2006, in the face of falling interest rates and SBI delivering what seemed to be sub-optimal returns, the EPFO’s Central Board of Trustees (CBT) had cleared an idea mooted by its Finance and Investment Committee (FIC) to introduce multiple fund managers as competition to SBI. The FIC had also asked EPFO to prepare an approach paper on the proposal.
Ironically, the same FIC is responsible for stalling progress on the reform move. Since EPFO doesn’t have an in-house treasury department or expertise, it was decided that an individual consultant be engaged to assist in drawing up the modalities for new fund managers’ entry. Among other things, the consultant was to advise on the eligibility criteria for applicants, tendering processes and measuring managers’ performance.
It was only in April 2007 that the FIC took up the matter again and decided to request two eminent persons to play the consultant’s role. The only problem: both of them were former SBI chairmen, A K Purwar and M S Verma. While letters were sent to both, they refused to take up the task at hand citing “insufficiency of infrastructure” and of course, “their past association with SBI”.
Speaking to The Indian Express, one of the two chairmen said, “I was definitely approached. But I told them right away, having been SBI chairman in the past, it would be better for them to approach someone else. The recommendations they need are obvious, but I didn’t want to be the one making them. How can I advise them on how they can take away SBI’s business? So I politely said no.”
The FIC is headed by the financial advisor (FA) to the Labour Ministry while its member secretary is the EPFO’s Chief Accounts Officer and FA Abhay Singh. Along with three employer representatives, the FIC also has Bharatiya Mazdoor Sangh’s A Venkatram, INTUC president G Sanjeeva Reddy and CITU’s W R Varadarajan.
While the FIC’s bizarre recommendation may be seen as a creative way of stalling reforms, after the two former SBI chairmen rebuffed them, the committee took up the matter again only last month. This time, they had a new idea but the aim again seems to be to buy more time.
Instead of an ‘individual’ consultant, the FIC now wants a ‘professional’ consultant to be appointed by a ‘limited tendering process’ to help EPFO in appointing multiple fund managers. Moreover, to figure out the modalities for appointing the professional advisor, it has set up yet another committee.
The three-member panel, which includes Labour Ministry’s social security and finance directors as well as EPFO’s CAO, has been empowered to initiate the tendering process and complete the consultant’s appointment. Ironically, the FIC has added that the consultant selected by this committee may or may not be the same it had recommended, hinting that the two ex-SBI chairmen may still be considered.