PMAY drives up MGNREGS wage costs

This is a curious case of a flagship government scheme sharing the cost of another. The rural development ministry has told the finance ministry that the elevated wage cost under the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS) is part-driven by another rural programme, Pradhan Mantri Awas Yojana (PMAY) Gramin, a person aware of the matter told ET.

Under MGNREGS, wage cost of about Rs 10,000 crore, or one sixth of the scheme’s FY24 budgeted outlay of Rs 60,000 crore, is estimated to go into the construction of rural houses under PMAY, he said.

This is because MGNREGS covers works like house construction in rural areas under the PMAY and state programmes. The government allows 90-95 days of wage assistance for construction under the PMAY (Gramin) from the MGNREGS outlay, over and above the unit cost provided to the beneficiaries under the housing scheme.

MGNREGS wages of about Rs 35,000-40,000 crore are estimated to have gone into the construction of houses under PMAY (Gramin) since the scheme was rolled out in November 2016 by revamping the erstwhile Indira Awas Yojana, said the person. House construction under PMAY has picked up pace in the last two years, pushing up the MGNREGS wage cost on such an account.

However, the MGNREGS wage bill is expected to ease next fiscal, unless in the unlikely scenario of a rural distress, as the deadline for the “housing for all” initiative under PMAY (Gramin) is expiring in December 2023, he said. “There will be less outgo from the MGNREGS budget for house construction next fiscal.”

The finance ministry, late last month, had to release Rs 10,000 crore in urgent assistance after the FY24 budgetary outlay of Rs 60,000 crore for MGNREGS was almost exhausted, amid speculation about fund diversions under the scheme.

The budget for FY24 had trimmed the MGNREGS outlay by a third to Rs 60,000 crore from the revised estimate of Rs 88,400 crore for FY23. However, finance minister Nirmala Sitharaman had said that more funds would be provided for the scheme if required.

More people sought work under the MGNREGS until October this fiscal year from a year earlier, contradicting initial official projections of a moderation in demand. This was mainly due to an erratic monsoon that prevented the usual migration of workers to farming, and a tentative industrial recovery, experts said.

As for PMAY (Gramin), the government has allocated a record Rs 54,487 crore, up 12.5% from the revised estimate of FY23, to ensure that construction of rural houses gets over before the deadline.

In FY23, India built 5.28 million houses under the housing scheme, up 25% from a year earlier. This year, it has planned to build 5.73 million homes, which will enable it to realise the cumulative target of building 29.5 million houses under the PMAY (Gramin) to ensure “housing for all”.

Harry Byrne

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