Rural housing construction may be driving up MGNREGS costs, says ministry

The rural development ministry has informed the finance ministry that the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS)'s expenditure may be elevated due to another flagship programme, the Pradhan Mantri Awas Yojana (PMAY) - Gramin, according to a report by The Economic Times (ET). This revelation came as the rural development ministry explained the dynamics influencing MGNREGS expenditure to the finance ministry.

MGNREGS encompasses activities like house construction under PMAY and state programmes. The government permits 90-95 days of wage assistance from MGNREGS for construction under PMAY (Gramin), supplementing the unit cost provided to beneficiaries. Therefore, approximately Rs 10,000 crore from MGNREGS, around one-sixth of the scheme's Rs 60,000 crore budget for the financial year 2023-24, may have gone towards rural housing construction under PMAY - Gramin.

 

Reportedly, Rs 35,000-40,000 crore of MGNREGS wages have already gone towards the construction of houses under PMAY-Gramin since it was revamped in November 2016 from the previous Indira Awas Yojana. Moreover, the acceleration in the construction of homes over the last two years has led to an increase in MGNREGS wage costs for this purpose.

The MGNREGS wage bill is anticipated to ease in the next financial year as the deadline for the "housing for all" initiative under PMAY-Gramin concludes in December 2023. The Finance Minister has also assured that further funds may be dispersed if required in addition to the Rs 60,000 crore outlay. In fact, Rs 10,000 crore has already been released in "urgent assistance" last month after nearly 95 per cent of the funds had already been released to meet the high demand.

As earlier reported by Business Standard, the actual expenditure of MGNREGS has been historically higher than the budgeted expenditure, especially since the Covid-19 pandemic. In FY21, the allocation was Rs 61,500 crore, but the actual expenditure was Rs 1.1 trillion. In FY22, the actual expenditure was Rs 98,468 crore as compared to the budgeted Rs 73,000 crore. In FY24, the budgetary allocation for the scheme was cut to Rs 60,000 crore, but the expenditure has already crossed that.