An EPFO source said on condition of anonymity that sustaining the 8.5 per cent rate was not tenable due to a resource crunch. "We have already coughed up Rs 365 crore to meet this year's deficit. It ate into the reserves needed to meet exigencies," he said.

According to the latest EPFO factsheet that is expected to be circulated at the meeting, if the government continues with the 8.5 per cent interest rate in 2006-07, the net deficit will mount to Rs 454 crore. The source said an 8 per cent interest rate would help the EPFO break even and generate a marginal surplus of Rs 17 crore.

A senior EPFO official said if the board decided to stick to the existing 8.5 per cent rate, the government would have to compensate the EPFO for the deficit incurred. "Then we can continue with the prevailing interest rate," he said.

But given the Centre's unwillingness to bridge the deficit, the Central Board of Trustees is likely to decide on a marginal dip in the interest rate.