EXPLAINER | Why informal workers can’t afford contributory pensions

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

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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.

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