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Coal India pension fund delay draws CAG wrath

Coal News - Published on Wed, 20 Jun 2018

Image Source: INCORE
Economic Times reported that Coal India’s pension fund, which is facing a funds crunch that has delayed payments to about 5 lakh retirees in June, is in poor health because of gross mismanagement and blatant violation of investment norms, the Comptroller and Auditor General of India had pointed out in its last report on the matter. The report concluded that the intended purpose of setting up of the Coal Mines Provident Fund Organisation would be seriously affected due to inadequacies in the management of funds earmarked for the benefit of the members.

Violating prescribed pattern for investment, the CMPFO invested its entire amount of general provident fund contribution of its own employees for the period under audit (2011-16) in short-term deposits of State Bank of India against the allowed 44% of the total amount of investment. The norm stipulates a maximum of 55% in government securities, 40% in debt securities or term deposits, 5% in money market instruments, and 15% in shares. It was also provided that at no time, investments in any category would exceed 10% of the prescribed limit.

The CAG tabled the report in July 2017 with a note saying the problems in the CMPFO were reported to the government in September 2016 but it had received no response until January last year.

According to the CAG, the CMPFO also failed to implement recommendations of actuaries for revision of contribution to the pension fund, which remained static for the last 17 years, leading to acute deficit of Rs 19,699 crore as on March 31, 2013. The latest actuarial report strongly recommended enhancement of the rate of contribution to 19.46% of salary from existing contribution rate of 4.91% (effective since 1998) for sustainability of the pension fund.

The CAG said that “No action had been yet taken on this recommendation.” To overcome the deficit in the pension fund, the CMPFO resorted to irregular diversion of funds from the provident fund account of the members.

The CMPFO diverted INR 3,520.14 crore from the provident fund account to the pension fund account during 2007-08 to 2014-2015 to meet the deficit of the pension fund. Out of this, an amount of INR 1,737.99 crore was returned in 2014 to the provident fund account, leaving an outstanding liability of INR 1,782.15 crore, which was yet to be returned to the provident fund account till August 2016.

Funds diverted to the pension account did not earn any interest between 2007 and 2010. It earned a lower rate of interest for the period 2010 to 2012. Further, the diversion of funds from the provident fund account to the pension fund account is in violation of provisions of the Coal Mines Provident Fund Scheme.

The CAG also noticed instances of excess payment of pension, irregular payment of interest and untraced balances, indicating poor monitoring and control. The CMPFO did not review the appropriateness of the rate of administrative charges collected from coal companies fixed 35 years ago, resulting in accumulation of large volume of assets. It also pointed out that non-linking of current accounts with corporate liquid term deposit scheme and non-review of rate of administrative charges led to losses for the pension fund.

Earllier this month, Animesh Bharti, commissioner at the CMPFO, when asked on delay in pension, admitted that there was funds crunch and monthly inflow of fund was INR 60 crore short of outgo.

Source :

Posted By : Amom Remju on Wed, 20 Jun 2018
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