Pvt coal miners may get EPFO option
1 min read 12 Jun 2023, 11:26 PM ISTThe move to replace the Coal Mines Provident Fund and Miscellaneous Provisions Act will affect a relatively small number of employees—running into their tens of thousands—given the fact that private coal mining in India is only a few years old.
PremiumNew Delhi: The Centre may bring in a new law to allow private coal mining companies to choose between Coal Mines Provident Fund Organisation (CMPFO) and the Employees Provident Fund Organization (EPFO) for their employees, said two people aware of the developments.
Under EPFO, half of the provident fund amount of an employee remains invested and is disbursed in the form of a pension. Under CMPFO, on the other hand, the whole amount needs to be disbursed at one go at the time of retirement, making CMPFO a more expensive option for mining companies.
The move to replace the Coal Mines Provident Fund and Miscellaneous Provisions Act will affect a relatively small number of employees—running into their tens of thousands—given the fact that private coal mining in India is only a few years old.
With private players allowed in commercial coal mining only since 2020, the move is expected to bring in flexibility for private coal miners and lower the burden on CMPFO.
“Under CMPFO, workers and employees of all coal mining companies, wherein employees are allowed to get their provident fund money at one go at the time of their retirement. While under EPFO, half of the funds are generally disbursed as monthly pension to the retired employees, making CMPFO an expensive proposition for the employers," said a person in the know.
Another person said the options, if provided, would be available only for the private coal mining companies. Public sector companies including Coal India Ltd and its subsidiaries would have to remain associated to CMPFO.
“The Act requires a revamp. Given that the law was enacted way back in 1948, it may have to be abrogated and a new law may be brought along similar lines, with several changes to the existing Act. Deliberations are on and no final decision has been taken yet," the second person added.
The move seems to be aimed at making the newly liberalized sector more attractive for private sector investors. The Centre opened up coal mines for commercial mining to the private sector in 2022. So far, seven round of coal mine auctions have taken place and both public and private sector companies have placed their bids and forayed into the segment. In the seventh round, 106 coal mines were put on the block. Of them, 61 mines are partially explored and 45 fully explored.
The CMPFO has been entrusted with the responsibility of administering the Coal Mines Provident Fund and Miscellaneous Provision Act, 1948 and different schemes framed under it. It is an autonomous organization governed by a board of trustees and functions under the supervision of the union ministry of coal.
Workers contribute 12% of their earnings to the CMPF and employers pay an equivalent amount. Aother 7% of the salary goes into a pension scheme along with matching contribution by the employer. The total investment managed by CMPFO through its fund managers stands at around ₹1.2 trillion.
Queries sent to the union ministry coal remained unanswered.