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Coal India faces CAG heat over Rs 371 crore excess PF deposit

Kolkata: The Comptroller and Auditor General (CAG) has pulled up Coal India for making an excess contribution of Rs 371 crore to its provident fund body unlawfully for five years till 2018.

The national auditor has pointed out in a recent report that Coal India and its subsidiaries deposited the sum with the Coal Mines Provident Fund Organisation (CMPFO) as an employer’s share of provident fund contribution on leave encashment, though this was not permissible under law.

“The practice was not stopped despite a Supreme Court order dated March 2008 in another civil case and despite highlighting the same in the C&AG’s Audit Report of 2009-10,” the auditor said.

A senior Coal India executive, however, argued that the practice was stopped after CAG pointed out the issue.

Coal India deposits retirement benefits with CMPFO that is matched by the employee contribution every month. It is used by CMPFO to pay a lumpsum on retirement and disburse the monthly pension to the staff. It is a standard practice in public sector companies for employees to opt for cash in lieu of accrued leave. This being an income, the employer deducts a portion and deposits it with the CMPFO as part of retirement benefit.

The Supreme Court ruling mentioned that the basic wage was never intended to include amounts received for leave encashment and directed that if any payment has been made, then it can be adjusted for future liabilities.

According to CAG, even after a clarification by the CMPFO commissioner in July 2016, no action was taken by Coal India till November 2017 to discontinue the practice. Coal India subsequently instructed its subsidiaries for discontinuing the practice.

The coal ministry in its Action Taken Note in January 2018 said a process has been started to list out the employees against whom the excess payment towards PF contribution occurred and it would be completed early for initiating the adjustment process.

The CAG report mentioned that though the coal ministry stated that the adjustment process would be initiated early, it has not been implemented. “Notwithstanding the Supreme Court judgment and clear directions of the coal ministry, no action had been taken for adjustment of the excess contributions already made by the employer against its future liabilities,” it said.

“Thus, due to inordinate delay in taking action to discontinue the irregular practice… Coal India and its subsidiaries lost the opportunity to adjust the same towards future liabilities in respect of the employees already retired. The matter was referred to the ministry in October 2018; their response was awaited,” CAG’s report said.

Source: Economic Times