On November 1, the crisis-struck DHFL again hit the headlines. This time the reason behind the stir was the investment of employees’ funds worth over Rs. 2,600 crore of the state-owned Uttar Pradesh Power Corporation Ltd. (UPPCL) in the company. DHFL, the privately-owned mortgage lender, is the same company that came under the scanner in the wake of allegations that the company had siphoned off crores of money through layers of shell companies. As a result of which the Bombay High Court had stayed payments of DHFL.
The case rings many bells. The surplus public fund is invested in the market, in this case, a fixed deposit scheme. A crisis hits the company, thanks to the shady links and deals of the private players, and the whole market is being taken for a downward ride. With it, what also gets exposed to the losses, is the hard-earned money of the employees.
This money that has been exposed to the vicissitudes of the market, was actually meant to provide social security to the working individual. Various corpus funds, such as, Employees Provident Fund, Employees State Insurance and Pension Scheme among other schemes have been introduced in the past to achieve the same goal.
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However, under the Modi regime, the same funds have been targetted for investing in the market, inviting flak from lakhs of government employees. Be it exposure of the crores of provident funds to the vagaries of the stock market or turning its back to the protests of the government employees against the New Pension Scheme (NPS), the policies followed by the Modi government has effectively poked a hole in the safety nets of the employees.
At first, take the case of the Employees Provident Fund. One year after coming to power, the Modi government in 2015, took the decision for EPFO to start investing in exchange-traded funds. “The decision was opposed by both, employers’ and employees’ fronts, in the meetings of the Central Board of Trustees,” Tapan Sen, General Secretary of Centre of Indian Trade Unions (CITU) told NewsClick, adding, “however, the Finance Ministry superseded our suggestions and went ahead.”
The allocation of the investments of EPFO in equities was further increased from 5% in 2015 to 15% in 2018. The rest was invested in government securities, bank deposits and private sector bonds. In September 2018, the government issued a notification making 24 additional provident funds—with combined amounts to a staggering Rs. 10 lakh crore—to be regulated by the labour ministry through EPFO. The notification meant that a part of deposits with these funds will now be invested in stocks which translated to the setting up of a ticking time bomb.
This bomb was triggered this year in February when trouble started brewing in India’s shadow banks. When reports of the Infrastructure Leasing and Financial Services Ltd (IL&FS) crisis started surfacing in the media, thousands of crores of provident and pension fund trusts were also exposed to risks. What’s more shocking was the response of the finance ministry saying, “Since these are investments in bonds, the government does not ensure any guarantee on them as such and if these are invested in stock markets, they carry the market risks as applicable.”
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Secondly, it is the New Pension Scheme—a defined contribution scheme mandatory for all new recruits to the Central government (except armed forces) joining on or after January 1, 2004—that has brought scores of government employees together up in arms.
The idea to link pension benefits to the market has not been welcomed by the employees. Many have complained of receiving as low as Rs. 700 to Rs. 800 as their monthly payment. Compare this with the minimum guaranteed amount in the old scheme, that is, Rs. 9,000.
Though it left out a majority section of the population—those belonging to the unorganised sector—the social security funds played a significant role, at least, for the government employee. It goes without saying that clearly-defined pension amounts and safety nets in the form of interest rates were the main attractions for a government job.
The central trade unions have objected to such dilution of the established social security structures. Given the history of non-performing assets (NPAs), and the crisis in non-banking companies and cooperative bank, the workers’ fronts have also protested the provisions of the Social Security code that earlier called for pooling of all funds to be administered by a single trust. They have also protested that the existing trusts be corporatised.
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Both the proposals, according to Sen, smacked of “the Modi government trying to put the savings of the employees as a fodder to chip the Sensex and the Nifty.”
With no social security for the informal workers—constituting almost 93%—and an ongoing struggle of the formal workers to retain the benefits, the Modi government has failed both.