A Parliamentary Committee has highlighted the poor response to the government’s contributory pension scheme for unorganised workers — Pradhan Mantri Shram Yogi Maandhan Yojana (PM-SMY). Banasree Purkayastha looks at the reasons behind it & how it can be made more popular
What does the report say
A report by a Parliamentary Standing Committee headed by BJP leader Basavaraj Bommai has revealed the distress faced by workers in the unorganised sector due to lack of employment opportunities. The dismal performance of the Pradhan Mantri Shram Yogi Maandhan Yojana (PM-SMY) — a contributory pension scheme for workers from the unorganised sector — indicates that workers are not earning enough to contribute to the scheme on a monthly basis. The government’s spending on the PM-SMY to match the contribution made by the workers has halved in the past two years. This means that workers’ contribution has also halved. The report which was tabled in Parliament recently, said that in FY 2023-24, Rs 350 crore was allocated at the budgetary estimate (BE) stage which was reduced to Rs 205.21 crore at the revised estimate (RE) stage. However, actual expenditure as on March 31, 2024 was Rs 162.51 crore only. In FY 2021-22, actual expenditure was Rs 324.23 crore which fell to Rs 269.91 crore in FY2022-23.
Reasons behind the dismal performance
The labour ministry has stated six reasons, including “unavailability of regular employment opportunities” in the unorganised sector. The other reasons cited are the adverse impact of Covid on the lives of unorganised workers, requirement of long-term financial commitment by those enrolling for the scheme, need for awareness, persuasion and mobilisation of beneficiaries, lack of a formal employer-employee relationship and the presence of other pension schemes. With workers in this sector unable to find long-term, stable employment, paying regular, monthly premiums of Rs 55 to Rs 200 is beyond their means. As daily wage labourers or those engaged in family farms, the income of a large section of these targeted workers is extremely low and even non-existent at times. For those looking for work in construction sites, increasingly employment on contract is what’s available.
Features of the pension scheme
Unorganised workers in the 18 to 40 years age group have to make prescribed age-specific contribution and a matching amount is paid by the central government. On entry at the age of 18, a worker has to pay Rs 55 per month till the age of 60, while on entry at 29 years, it is Rs 100. The monthly pension after turning 60 is Rs 3,000 . If a beneficiary dies before the age of 60, their spouse can either join or exit the scheme. However, if both die before the age of 60, there is no provision of payment of any lump-sum amount to the next of kin. The scheme targets street vendors, head loaders, cobblers, rag pickers, domestic workers, washermen, rickshaw pullers, agricultural workers and construction labourers, with monthly income up to Rs 15,000. The window for revival of dormant accounts has been extended to three years from the date of default.
Driving up enrolment
Against the target of enrolling 100 million beneficiaries during 2018-23, around 5 million beneficiaries had been enrolled till the end of FY24. The unorganised sector accounts for around 90% of India’s total workforce of around 565 million. The e-Shram portal, which is building a national database of unorganised workers, has registered around 305 million workers. As such, the e-Shram portal is the best way to ensure that more such workers are enrolled, says Partha Pratim Mitra, former principal labour and employment adviser, ministry of labour and employment. “Most workers do not have proper documentation which further makes these schemes inaccessible. If these schemes are offered to workers registered with the e-Shram portal, the government will be able to onboard a many more workers,” he says. The Indian Institute of Public Administration (IIPA) has also suggested that all social security services provided to unorganised workers should be through the e-Shram portal only.
Tweaking the scheme
The IIPA has suggested expanding the entry age to 50 years. It also suggested merger of the PM-SMY and the Pradhan Mantri Laghu Vyapari Maan-Dhan Yojana scheme (it provides old age protection and social security for small-scale traders and retailers) with the flagship old age pension scheme, Atal Pension Yojana (APY). However, the government has extended the scheme for another year, i.e, 2025-26, pending revision of the scheme to make it more attractive by early next fiscal year.
On unorganised workers unable to afford the premiums, Mitra says the government will need to work out a solution where the beneficiaries do not have to pay out of their pocket. A direct benefit transfer plan for old age security for such workers could be designed. “A distinction has to be drawn between social assistance schemes and social security schemes. That has to be a policy call since the government would have to divert funds from other schemes,” he adds. Old age pension for senior citizens under National Social Assistance Programme are more accessible to informal workers as this is free of cost.