The Labour Ministry today said it would abide by the decision of the Central Board of Trustees (CBT) on whether a portion of Rs 5 lakh crore of provident funds should be invested in stock markets or not.

"The CBT decision would be final on whether Employees' Provident Fund Organisation (EPFO) should make investment in stock markets or not. The board would soon take up the issue," Minister of State for Labour Harish Rawat told reporters here at a PHD seminar.

There are differences between the ministries of Labour and Finance on the issue. The Finance Ministry wants the Labour Ministry to follow the investment pattern that it is has notified, which provides for up to 15 per cent of the corpus in stock markets without approval of the EPFO's apex decison making body Central Board of Trustees (CBT).

The Ministry of Labour and Employment has forwarded the advice of the Finance Ministry to the EPFO's board for consideration and the trustees are likely to take up the issue in its next meeting scheduled on September 15.

Earlier, Labour Secretary P C Chaturvedi had also said that the "decision of CBT would be final and supreme".

"We are careful in investing money of our workers. People call us very conservative, but paramount thing is safety of principal amount (deposits) of workers," he had said.

In a recent letter to Chaturvedi, Finance Secretary Ashok Chawla had referred to the changes made in EPF schemes earlier without any discussion with CBT and said it (Labour Ministry) could take a similar view on the issue of investment pattern of provident funds.

On the letter, Chaturvedi had said, "There are many missing links in the advice of Finance Ministry (to invest in equity). There are many issues in that."

He added, "When you say equity, it is not face value. It is not that you are getting Rs 10 share for Rs 10. You are getting that at Rs 100. Tomorrow this Rs 100 could become Rs 120 or Rs 80."

Chaturvedi said there were several issues, operational as well as about the returns, involved in the case. "You don't get anything by way of interest (by investing in equity). It is only when you liquidate that share only then you get return."

He had also said the Finance Ministry's advice is based on the experience of New Pension Scheme (NPS) where they have admitted that there is no data available to establish that "what Labour Ministry is doing is inferior to what they are advising."

Chawla's letter said that while NPS for central government employees could generate a weighted average investment return of 14.82 per cent in 2008-09, EPFO has been giving only 8.5 per cent returns to its subscribers for many years.

The EPFO has been giving 8.5 per cent return annually to its subscribers since 2005-06.

Countering Chawla's views, EPFO said the income earned on EPF investments are actually realised, while the returns declared in NPS are notional and subject to market conditions.

Later last month on August 25, CBT's advisory body Finance and Investment Committee (FIC) stuck to its stand against investment of EPFO money into stock markets--either in shares or indices.

Whereas the Employees' Provident Fund Organisation commands a corpus of Rs 3 lakh crore, other provident funds, which follow the Fund's investment pattern, have another Rs 2 lakh crore.