EPFO today is literally scraping the barrel to pay the returns it decides every year. On the pension front, EPFO has been unable to carry out much-needed corrections, as it waits for its trustees to arrive at a consensus. In the 1980s, most countries realised the dangers of defined benefit pension schemes, and by the mid-1990’s most had moved to the defined contribution system. But India set up the EPS as a DB in 1995. Within a decade, the estimated unfunded liability of the EPS rose from Rs 43 crore in 2001 to Rs 22,000 crore in 2004-05. With improved mortality and unpredictable interest rates, this number may increase further in the future.

The government can no longer hide behind the fig leaf that the EPFO’s board of trustees has not reached a consensus on major policy reforms.

The writer is executive director, Invest India Micro Pension Services