New Delhi: The ministry of rural development has demanded a nearly 60% increase in the allocation for its marquee job guarantee scheme in the forthcoming Union budget for fiscal 2011-12.

The ministry has sought an allocation of around 64,000 crore, up from 41,100 crore, for the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS), a ministry official said, requesting anonymity.

Cost pressure: The demand for a steep hike in funds for MGNREGS is unlikely to be met with the Planning Commission indicating a cap of Rs72,000 crore for the entire ministry. Photo: Indranil Bhoumik/Mint

MGNREGS, the flagship programme of the Congress-led United Progressive Alliance (UPA) government promises 100 days of work a year to each rural household. Currently, it provides employment to 41 million households, generating 1.45 billion person days of employment.

“Yes, we have sought 4,000 crore for MGNREGS, but the Planning Commission has indicated a cap of around 72,000 crore for the ministry (which includes all its schemes)," said another ministry official, who also declined to be named.

This demand by the ministry comes after the government revised minimum wages paid under the programme by linking them to the Consumer Price Index for agricultural labour (CPI-AL) for each individual state with effect from 1 January. The minimum wage prior to the indexing was 100 per day.

It estimates this revision will cost the exchequer an additional 3,500 crore in the year ending 31 March.

“We have demanded this much because we need that money. After the wage rate revision, the expenditure under the scheme will obviously increase. And since the scheme is gaining ground, the number of mandays it generates will also increase. Also, the expenditure under the scheme will further increase when the wages are indexed based on CPI-AL for 1 January 2012," said the second ministry official cited above.

However, the demand for a steep hike in funds for MGNREGS is unlikely to be met with the Planning Commission indicating a cap of 72,000 crore for the entire ministry. Other schemes under the ministry include the Indira Awaas Yojana with an allocation of 10,000 crore and the Pradhan Mantri Gram Sadak Yojana (PMGSY) with a budget of 12,000 crore.

In the last budget, the scheme’s allocation was increased by a mere 3%, up from 39,100 crore in 2009-10. This was drastically lower than the 30% at which allocation to MGNREGS increased in 2009-10, and far lower than the 150% at which the allocation increased in 2008-09.

The scheme covers 619 districts across India. The significant increases of past years can also be attributed to the increase in coverage, from 330 districts in 2007-08 to 615 districts in 2008-09 to 619 districts in 2009-10.

According to official data, only 20,854 crore had been spent under the scheme till December, leaving a balance of over 19,000 crore for the remaining three months of the fiscal year.

Last year, the ministry had projected a requirement of 62,000 crore for MGNREGS but had been allocated only 40,100 crore.

Meanwhile, a report by the parliamentary standing committee on rural development in last April had said funds allocated to this rural welfare scheme were enough to meet only about half its objective.

The committee, which assessed demands for grants for the scheme for 2010-11, had said on 16 April that only 51 days of work could be provided, on an average, by utilizing funds available for the scheme in 2009-10.