Finance Commission holds meeting with The Ministry of Rural Development

The 15^th Finance Commission headed by Chairman, Shri N. K. Singh including its Members today held a meeting with the Minister for Rural Development, Shri Narendra Singh Tomar and senior officials of his Ministry to garner the view of the Ministry of Rural Development (MoRD)  on the general framework given by FC-XV in its report for 2020-21 on the maintenance of Pradhan Mantri Gram Sadak Yojana  (PMGSY) roads.  The meeting also discussed the recent announcements made by the Government of India for rural development together with the  proposal of the MoRD for maintenance of PMGSY roads for consideration of the FC-XV on the grants/performance incentives to be recommended for the States for the period 2021-26 within the provisions of the TOR of the Commission.

The Fifteenth Finance Commission has considered the matter of rural connectivity through Pradhan Mantri Gram Sadak Yojana (PMGSY) in its report for the year 2020-21 and noted the criticality of assured fund flow for maintenance of the road assets created through this programme for the last twenty years.  In its report the Commission has noted that:        

“Rural roads are recognised as catalysts to rural development and a significant element of poverty alleviation initiatives. Under the Pradhan Mantri Gram Sadak Yojana (PMGSY), till date, 5,50,528 km road length has been constructed and 89 per cent of all eligible habitations have been connected. This huge asset demands a recurring and predictable stream of funds for maintenance. During our discussion with various stakeholders, including the Ministry of Rural Development, it has been brought to our notice that the maintenance of PMGSY roads, unfortunately, receives low priority in the total resources earmarked for development works. 

Hence, in our view, it is extremely important to provide for maintenance of the PMGSY roads, following the completion of the five-year maintenance contract.   This matter will be suitably addressed in our final report based upon overall resource availability and demonstrable efforts made by States in earmarking funds from their own untied resources towards maintenance of such assets.”

Post the global Pandemic of Covid-19, in the fourth tranche of ₹ 20 lakh crores fiscal stimulus package, Government of India announced ₹ 40,000 crores increase in allocation for MGNREGS to provide employment boost. This, the Commission has held,  will help generate nearly 300 crore person days in total. It will address need for more work including returning migrant workers in Monsoon season as well creation of larger number of durable and livelihood assets including water conservation assets. This will boost the rural economy through higher production.

The MoRD submitted its memorandum to FC-XV for the award period of  2020-21  to  2025-26,  where they projected the requirement of ₹ 82,946 crores ( for 5 years) for the duration of the Commission’s period of recommendation.

The MoRD made a detailed proposal on Maintenance Funds for PMGSY Roads.  According to the proposal, a per the census of 2011, 45,614 habitations of population 250+ are unconnected as of now.  The burden of connecting the balance unconnected has a financial implication of ₹ 130,000 crore. 

MoRD has further projected that the financial liability for maintenance of PMGSY Roads would be –

The Ministry has asked for inclusion of Maintenance Grant in XVFC recommendations on the following grounds and conditions:

• FFC grant in aid as sectoral intervention for maintenance
• The state backwardness and the length of PMGSY roads may be used as proxy to calculate the eligibility of the states
• Cost norms to be higher for hill roads at 1.2 of normal cost
• Good governance preconditions like states maintenance policy, E-Marg, States’ own budget contribution etc. would be mandatory
• Separate budget head for rural/ PMGSY roads
• Funds to be transferred to department executing works.
• State share may be asked for.
• Next year release on the basis of utilization.

The Commission had a fruitful discussion and promised to take into consideration the suggestion of the Ministry in making its recommendation in the matter.