The Central Board of Trustees of Employees Provident Fund Organisation is likely to cut the EPF interest by one per cent from the present 9.5 per cent when it meets on May 31, despite Labour Minister Sahib Singh Verma's continuous efforts to prevent a reduction. 

The move, perpetuated by pressure from the finance ministry, comes in the backdrop of Central Board of Trustees' Finance and Investment sub-committee's suggestion of at least a 0.5 per cent reduction in interest on EPF.

The panel had envisaged three interest rate structure of 8.0, 8.5 and 9.0 per cent, with nine per cent yielding deficit and the others earning surplus for the fund, having an over Rs 1,40,000 crore (Rs 1,400 billion) corpus.

"CBT chairman is left with no other option but to cut the interest rate by one per cent, if it has to earn surplus," one of the members told PTI, adding the fund could earn a surplus of around Rs 218.98 crore (Rs 2.19 billion) if it went ahead with 100 basis points cut.

Considering the political overtones, the sources said CBT might not go for a 1.5 per cent reduction, though finance ministry officials were of the view that only such a drastic reduction could make the EPF viable in the long-term due to repeated cuts in Special Deposit Scheme.

However, some officials apprehend that Verma may seek to buy time from taking a decision on the sensitive issue and cited recent instances involving the introduction of conditional access system and value-added tax.

A marginal 0.5 per cent cut to 9.0 per cent would get the CBT into problems owing to a projected deficit of Rs 105.18 crore (Rs 1.05 billion) since the liabilities would be Rs 5,819.23 crore (Rs 58.19 billion) and the income Rs 5714.05 crore (Rs 57.14 billion).

The sources apprehend that the meeting could witness some chaos especially considering that the Left-parties led trade unions had been clamouring for restoration of 12 per cent interest rate.

One of them even said it would "fight tooth and nail" to restore at least the existing 9.5 per cent, which the North Block officials termed as "exorbitant and unsustainable" even in the short run.

Though Verma maintained that he would try to retain 9.5 per cent and ruled out any cut during the Budget session of Parliament, the sources cited there was "a bit of softening of stance" by the labour minister in recent times.

"Of late, he (Verma) has not been commenting anything specific on the rates," the sources said.