It is the duty of the State to protect the value of workers’ savings!

On 25th July 2008, the UPA government announced the appointment of three private financial institutions – HSBC, ICICI Prudential and Reliance Capital – to share with the State Bank of India the responsibility of managing a small part, to begin with, of the workers’ savings held in the Employees’ Provident Fund (EPF). This is the first step towards the privatization of the EPF – that is, to hand over this fund to the capitalist class to use for the purpose of reaping maximum private profits. 

The total amount of money held by the Employees’ Provident Fund Organisation is more than Rs. 120,000 crore. This money belongs to the workers.  It is our savings fund.  It is held in the form of central government bonds and other sovereign debt instruments, with the State Bank of India (SBI) in charge of managing the assets. The 25th July decision is that the annual inflow into this fund, about Rs.25,000 crore, will come under a new management arrangement, involving competition between SBI and the three private companies. If all new inflows come under this new management structure every year, then in five years or so, the entire fund will be privatized.  This seems to be the calculation behind the government’s move.

The justification being given by the Congress Party and other representatives of the bourgeoisie is that if private institutions enter this field and compete with the SBI, then this will allegedly bring higher returns for the workers.  There are two facts they want to hide from working people. One is the fact that even if higher returns are earned by the private fund managers, they may or may not pass this on to the workers.  The other fact is that prospects of higher returns come along with the risk of negative returns. If the stock market crashes, then so will the savings of the working class!

If capitalist corporations are allowed to do what they like with our savings, then we workers can end up even losing our savings altogether. This has happened to many workers in the US and other countries where pension funds and other retirement benefits are managed by private profit maximizing institutions.

The privatisation of EPF is being initiated at a time when workers are already suffering from daily devaluation of their savings due to inflation.  The interest earned on EPF is only 8.5%, while the rate of inflation is over 12% even according to official sources.  This means that the value of workers’ savings is going down, day after day.  Not only is the real value of our monthly wage earnings going down due to inflation, but so is the value of what we have saved for future use.

Allowing privately owned, openly profiteering institutions, to compete with SBI in managing EPF, is not a solution to the problem of negative returns.  It is a bonus for the capitalists and their government, who get access to additional finance capital at relatively cheap rates.  It means higher risk for workers, and no guarantee against their savings being robbed.

The key point as far as workers are concerned is that the State cannot abrogate its duty of protecting the value of employees’ savings. It is part of the Raj Dharma of ensuring prosperity and protection for all. If private companies are in charge, then who will we turn to if our savings lose value? 

Today, we workers are demanding that the Central Government should raise the rate of return on EPF and bear the cost on budget.  This is an entirely justified and reasonable demand.  Once management is in private hands, the government will say “Sorry, this is no longer our business”. Workers will be at the mercy of the so-called market forces, which means the big private banks and profiteering institutions that dominate the capital market.

When inflation is raging so much higher than wage rise and the interest on EPF savings, it means that someone is eating up the earnings and savings of the working class. Who is this someone?  

Data on corporate profits for the latest available quarter shows exactly who in our society is gaining from inflation.  A recent Economic Times analysis of 4000 companies reported that sales revenue during April-June 2008 was 24% higher than the same period of 2007. For the large firms (with quarterly revenue higher than Rs. 4000 crore or US$ 1 billion), revenue growth was even higher, at 33%.  Salary costs also rose, but by less than the rate of revenue growth.  As a result, operating profit increased by 15% for the 4000 companies as a whole, higher than the rate of inflation.  Interest cost increased very steeply, by 34% – showing that the increased profits were largely eaten up by the money lending institutions.

Through inflation, money is being transferred from the hands of the working people into the hands of capitalist corporations and the financial oligarchy.  Monthly earnings as well as long-term savings are getting robbed.  Instead of taking measures to protect the real value of earnings and savings of working people, the government wants to feed the greed of finance capital for the maximum rate of profit. This is the real intention behind handing over of pension and provident funds to the private financial institutions.

The working class and all salaried people should vigorously oppose the move to privatize the management of Employees’ Provident Fund.  We must demand that the government must guarantee a return on our savings adequate to cover inflation plus a real increase commensurate with the real growth in the economy.