At a time when the Centre is tightening its purse strings, rural development minister Jairam Ramesh's plan to hike the construction costs of houses and toilets for rural poor has hit a roadblock.
After the Expenditure Finance Committee (EFC) refused to accept the escalated costs in its meeting on August 30, a "very disappointed" Ramesh shot a letter to finance minister P Chidambaram asking him to resolve the issue.
For the past few months, the rural development ministry has been pitching to increase the per unit construction cost of a house built under the Indira Awas Yojna (IAY) from Rs. 45,000 to Rs. 75,000 for normal areas.
It had also proposed to hike such costs for hilly and difficult areas from the existing ceiling of Rs. 48,500 to Rs. 90,000. Over and above these expenses, Ramesh's ministry had proposed an allocation of Rs. 9,000 as cost of building one toilet in villages.
Top sources indicated that as part of the government's temporary initiatives to reduce expenses in the backdrop of the slowdown in economy, the finance panel didn't approve these hikes.
In his letter to Chidambaram, Ramesh said, "The IAY is an essential pillar of our government's inclusive growth strategy as well as of our government's commitment to the empowerment of the weaker section of society."
"I was personally very disappointed with the outcome of the EFC meeting. I need to meet you very soon to resolve it at our level without necessarily having to take our differences to the cabinet," Ramesh added.
The finance ministry is believed to have asked different ministries not to press for additional funds for the current year, to control the fiscal deficit.
In his letter, Ramesh has pointed out that spiralling prices have made construction of houses with even Rs. 75,000 difficult.
Several states have also favoured a hike in per unit construction costs even as they bear 25% of the total cost of building IAY houses and toilets. The Planning Commission too, has backed a increase in the expenses for the IAY.