Top finance ministry sources have ruled out any accommodation on the Employees Provident Fund interest rate issue and have said the labour ministry will have no option but to cut interest rates, leading to the makings of a confrontation in the government.

In Kolkata over the weekend, Union Labour Minister Sahib Singh Verma had reiterated yet again that he would not allow interest rates payable on EPF to drop below 9.5 per cent.

The finance ministry, however, says the Employees Provident Fund Organisation will have no option but to take a 1 percentage point cut in the interest rate, because "we cannot be expected every year, year after year, to pay the difference -- Rs 14,000 crore (Rs 140 billion) is a lot of money and we cannot afford it."

The meeting of the EPFO's investment and finance committee, which will recommend the interest rates the central board of trustees should adopt, is scheduled for May 22.

"We know we will let down the Union labour minister. But he really should not have made public statements on an issue that is non-negotiable. If interest rates are dropping, the EPFO is bound to be as affected as anyone else. There is no point in politicising the issue," top finance ministry sources said.

However, Verma maintains that the government should not look at the Employees Provident Fund as just another fund, but one of the country's best managed and most secure sources of social security.

Verma has said he is seeking parity between the pension fund, which pays 9 per cent interest to citizens above 55 who deposit a sum of Rs 200,000 in the fund, and the EPF. Both, he says, represent sources of social security.