No Money Left in MGNREGA Coffers; 21 States in the Red

The Editors

The Centre’s flagship rural employment scheme has run out of funds halfway through the financial year, and supplementary budgetary allocations will not come to the rescue for at least another month when the next Parliamentary session begins. According to its own financial statement, the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) scheme shows a negative net balance of nearly Rs 7,000 crore already.

This means that payments for MGNREGA workers as well as material costs will be delayed, unless States dip into their own funds. Activists say the Centre is condemning workers to “forced labour” by delaying wage payments at a time of economic distress. However, the Centre is now accusing many States of “artificially creating demand” for work on the ground.

The MGNREGA is a demand driven scheme, guaranteeing 100 days of unskilled work to any rural household that wants it. During last year’s COVID-19 lockdown, the scheme was ultimately given its highest budget of Rs 1.11 lakh crore and provided a critical lifeline for a record 11 crore workers.

However, the scheme’s 2021-22 budget was set at just Rs 73,000 crore, with the Centre arguing that the nationwide lockdown was over and that supplementary budgetary allocations would be available if money ran out.

An analysis of the financial statement of MGNREGA as of November 1 by PAEG shows that the cumulative expenditure for the ongoing financial year is Rs 52,993 crore, while the pending liability for the same currently stands at Rs. 9,075 crore. Moreover, the total pending liabilities from the previous financial year is Rs. 17,451 crore.

This adds up to Rs 79,518 crore implying that the GoI is already running a deficit of at least Rs 6,518 crore already.

Already, 21 States show a negative net balance, with Andhra Pradesh, Tamil Nadu and West Bengal faring the worst.

“We are facing a situation of MGNREGA closing down halfway through the year. Who is going to absorb the cost? The poorest and most vulnerable communities who have already been crushed by the pandemic’s impact,” said Nikhil Dey, a founder of the Mazdoor Kisan Shakti Sangathan. He cited a 2016 judgement of the Supreme Court, which described pending wage payments under MGNREGA as “a clear constitutional breach committed by the State” and “a modern form of begar”.

“The Government of India is, on the face of it, pushing crores of people into forced labour, as held by the SC,” added Mr. Dey.

“It is somewhat early this year [to run out of funds],” admitted a senior official of the Rural Development Ministry, who did not wish to be named. “People will continue to get work. Only thing that might happen is that the payment will only be made once funds are available. But many States can provide temporary funds out of their own kitty and then once the fund is available, it can be reimbursed [by the Centre].”

The official blamed State governments for the current situation. “My apprehension is that the States are using it not as a demand driven scheme, but as a supply led scheme. The States are asking their field authorities to artificially create demand,” said the official. “The nature of the scheme is that once people turn up and demand jobs, then the demand is provided. It’s not that someone in the administrative hierarchy organises work and then asks people to join. That is what is happening in many States,” added the official.

Activists say the exact opposite is happening on the ground. MGNREGA data shows that 13% of households who demanded work under the scheme were not provided work. “Even these figures are underestimates, as only demand that is registered in the system is included. Many workers are simply turned away by officials when they demand work, without their demand being registered at all,” said Vijay Ram, a researcher with People’s Action for Employment Guarantee.

“When there is no money, State governments tend to stop generating work. In fact, there is an artificial squeezing of demand,” said Mr. Dey.

Moreover, in a study of 18 lakh wage transactions, under the rural jobs scheme, in 10 states during the same period, Bengaluru-based LibTech India found that 71% of the transactions by the central government exceeded the mandated period.

According to the Act – the scheme that provides up to 100 days work per household per year – the payment of wages to the workers is mandated to be completed within 15 days of completion of a muster roll of work, failing which the workers enrolled under the scheme are entitled to a delay compensation of 0.05% per day the wages earned.

Nikhil Dey, founder member of Mazdoor Kisan Shakti Sangathan, told Newsclick that the PAEG’s report highlights that there is an “urgent” need to make adequate funds available for the rural jobs programme. He pointed out that the total budget allocation for the said scheme was, to begin with, 34% less than the revised budget for the previous year.

“MGNREGA, that is the lifeline of the rural workforce, is as per law never constrained by budget but by demand,” Dey, who is also a PAEG’s working group member, said. This means, he added, that it is the “statutory obligation” of the central government to ensure that adequate funds are available for the MGNREGA and that the workers receive their work and payment on time.

According to him, there was already extreme distress within the rural workforce, which only worsened since last year due to the COVID-19 pandemic. “The delay in wage payments [under MGNREGA] results in mounting debt over distress for the rural workers,” Dey said.

[This article is based on articles by Bharat Dogra, an article in The Hindu (“No Money Left in MGNREGA Coffers; 21 States in the Red” by Priscilla Jebaraj) and an article in Newsclick.]

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Meanwhile, a press release by PAEG dated 3rd November 2021, published on im4change.org, “Around 5 Crore MGNREGA Workers and Their Families Will have to Spend Their Diwali Without Food & Sweets Due to Pending Wages” adds:

About 8 crore NREGA payments are pending as on November 3, 2021 according to Report 8.1.1 of the NREGA Management Information System (MIS). This means, for nearly 5 crore workers across the country this will be a Kali Diwali. Following the raging debate about NREGA funds running out with 5 months remaining, the People’s Action for Employment Guarantee (PAEG) seeks to point out how serious the crisis currently is. On such a festive occasion when people not only expect to be paid their due wages and hopefully a bonus, NREGA workers have not been paid wages for the work they have done. The hope of being paid in the near future is also bleak.

The Ministry of Rural Development (MoRD) claimed that there are Rs. 8,900 crore available for work to carry on. But this is not borne out by the facts of allocations, payments made, and pending liabilities. If MoRD’s claims are indeed true, then what explains over 8 crore pending transactions as on November 3, 2021?

These payments are calculated from fund transfer orders (FTOs) that have been generated but not paid as of today. Each transaction represents a worker who has worked for a week or 15 days. There are some cases where one worker would have several pending payments due, which only intensifies the distress. It is worse for those workers whose payments have been rejected and yet not corrected. As on November 3, 2021, 24.15 lakh transactions adding up to approximately Rs 300 crore of NREGA wages were rejected due to technical reasons. It is worse for those workers whose payments have been rejected because they are not available to them unless corrected.

From the time the Central Government allocated Rs 73,000 crore, reducing last year’s revised estimate by 34 percent, it became clear that money would run out approximately halfway through the year. The Central Government did find money to pay its own employees 28 percent Dearness Allowance and 3 percent Bonus for Diwali, but chooses to look away from existing dues for NREGA workers, leave alone their situation during festivals like Diwali.