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99% MGNREGA funds "exhausted", Govt of India makes no additional sanctions: Study

Counterview Desk
A letter, addressed to Prime Minister Narendra Modi, and prepared by senior activists led by Aruna Roy on behalf of the Peoples’ Action for Employment Guarantee (PAEG), and signed, among others, by 80 members of Parliament, has regretted that, despite repeated public statements by his government promising employment and job creation that will boost the country’s growth, the country’s only employment guarantee programme, Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA), “is being systematically undermined.”
The letter states, “Illegal restrictions on its budget allocation, severe payment delays and low wages are crippling the program and depriving people in distress of one of their most important legally supported structures”, urging him to strengthen MGNREGA as an “urgent priority” to deal with the current rural and agrarian crisis.
The letter demands “adequate and timely funds are provided to meet work demand” under NREGS, insisting, with wages under the scheme should not be “less that statutory minimum wage” of the state. It also asks PM to ensure that “wage payment delays beyond 15 days are separately calculated, disclosed and compensation paid.”
The letter follows an analytical note on the working of MGNREGA by PAEG, which says that more than 99% of MGNREGA funds have been exhausted, and no additional funds have been sanctioned, pointing out, “This has brought the programme to a complete halt at a time when rural India is undergoing acute distress with massive unemployment, declining farm incomes and rising inequality.”

Text of the note:

High levels of unemployment and declining farm incomes have led to a situation of acute rural distress across the country, which needs the urgent attention of parties across the political spectrum. MGNREGA is one of the strongest tried and tested measures that can be used to address some of these critical issues. It has played an important role in protecting the lives, livelihoods and wages of rural workers, and been a vital support to vulnerable communities, including those facing distress due to natural disasters and calamities.
Unfortunately, MGNREGA is being deliberately sidelined by the government, depriving people in distress of one of their most important legally supported structures. It requires immediate intervention from political leaders from all parties so that there can be a renewed commitment to MGNREGA from the ruling political dispensation. MGNREGA has served as a lifeline for the poor with 1 out of every 3 rural households having worked in the programme (NCAER Report).
In 2017-18, close to 8 crore people worked under MGNREGA. The average 1 number of days worked per household was 46 days in 2017-18. Despite the programme functioning at half its 100 day “guarantee”, it has had a far reaching impact:
  • According to the NCAER report, at least 25% of the decline in poverty since 2004-05 for participating households can be attributed to MGNREGA. 
  • After stagnating for at least three decades, the growth in real rural wages (especially agriculture) picked up in 2007–08 - following MGNREGA’s inception . The average growth rate of rural revenue jumped 2 from 2.7% per year in 1999-2004 to 9.7% in 2006-2011. 
  • MGNREGA assets reduce the vulnerability of agricultural production, water resources, and livelihoods to uncertain rainfall, water scarcity and poor soil fertility . Substantial evidence to demonstrate other 3 positive supply side effects and huge multiplier effects. 
  • Women’s participation in the workforce has increased substantially due to MGNREGA, and enabled their access to formal financial institutions and economy. 
  • Around 40% of the total households employed under MGNREGA every year, belong to SC and ST Households. 82% of MGNREGA workers belong to the low income group (NSSO). 
While there is substantial evidence of the positive impacts of MGNREGA, the government has, however, systematically neglected the programme, and undermined the law in the following ways:
1. Funds crunch

Being a demand driven programme, MGNREGA cannot be bound by budgetary constraints and not providing adequate funds as per demand is a violation of the law. The Centre has, however, made it supply driven -- violating the core principles of the Act.
a. Every year, the Finance Minister announces that the allocation for the programme is the “highest ever”. However, the inflation-adjusted allocation for 2017-18 is lower than even 2010-11.
b. In the last five years, one-fifth of the allocated budget is spent on clearing pending payments. This has led to a vicious cycle with crores of workers left in the lurch without wages for work done by them. This is unethical and unconstitutional.
c. World Bank economists recommended that at least 1.7% of the GDP must be allocated for the 4 programme to run robustly. But the allocation of MGNREGA as a proportion of GDP has been consistently low although GDP has increased. It is a meagre 0.38% of the GDP this year.
d. An ongoing analysis of government data on demand generated, and fund availability in 3500 panchayats across 10 representative states has shown a blatant violation of the law. The demand for work on record, and the employment provided have been downloaded for each of these 3500 panchayats and analysed. Employment provided is 32% lower than the work demanded. In monetary terms, using this data to estimate national allocation, Rs 76,131 crore is minimally needed to meet the registered work demand. This shows that the employment provided is wilfully capped based on the funds available. It must be emphasised, that this is a conservative estimate because demand “captured” on the MGNREGA Management Information System (MIS) is only a fraction of the real demand on the ground.
Demand for MGNREGA is high in the latter half of the year but each year there is high shortfall of funds during this period. About 99% of the allocated funds have already been exhausted (including payment due) this financial year and additional funds have not been approved. As a result, field functionaries are compelled to not register demand for work in order to contain the payment liabilities of the state governments. The situation has more dire consequences during drought when demand and need for work is higher than normal as was the case in 2015-16. The law requires government to pay unemployment allowance to those who demand work and fail to get it in 15 days which is rarely paid.
2. Wage Delays and Non-Payment of Delay Compensation The Act mandates that workers have to be paid within 15 days of completion of work. There are two stages in the payments process. After completion of work, an electronic pay order is prepared by the states and sent to the Centre. This is Stage 1. The Centre then processes the pay orders and transfers the wages to the workers’ accounts. This is stage 2. Stage 2 is entirely the Centre’s responsibility.
While the stage 2 delays are captured in the Management Information System (MIS), they are not getting reported. As per a study where more than 90 lakh transactions of 2016-17 were analysed, the average delays caused by the Centre to pay wages was 50 days. This trend continued in 2017-18 as well.
Contrary to the tall claims of 94% payments 'on time' payments by the government, the study found that only 21 percent and 32 percent wage payments happened within the stipulated 15 day period in 2016-17 and the first half of 2017-18 respectively. In a memorandum dated 21st August, 2017, the Ministry of Finance acknowledged that delay in payments were directly linked to lack of “availability of funds”. This glaring lacuna was argued in the Supreme Court in a recent PIL (Swaraj Abhiyan vs UOI and others) where the judgement categorically stated:
“The wages due to the worker in terms of Stage 2 above must be transferred immediately and the payment made to the worker forthwith failing which the prescribed compensation would have to be paid. The Central Government cannot shy away from its responsibility... The State Governments and Union Territory Administrations may be at fault, but that does not absolve the Central Government of its duty”.
The judgement dated 18th May, 2018 has still not been implemented. This not only reflects Contempt of Court by the Centre but also the insensitivity and a violation of the fundamental rights of the workers. Such massive delays and a refusal to pay the delay compensation, has caused considerable discontent among the workers and severely damaged the programme.
3. Delinking of MGNREGA Wages and Minimum Wage
The legality of delinking of MGNREGA wages from minimum wages has been questioned by multiple committees set up by the MoRD, the Central Employment Guarantee Council and the Karnataka High Court. It also stands in violation of the Supreme Court’s judgement in the Sanjit Roy and ors vs the State of Rajasthan case. The Court order stated:
“No work of utility and value can be allowed to be constructed on the blood and sweat of persons who are reduced to a state of helplessness on account of drought and scarcity conditions.The State cannot under the guise of helping these affected persons extract work of utility and value from them without paying them the minimum wage”.
Despite this, the Central Government has refused to reconcile MGNREGA with the Minimum Wages Act. Further, the Central Government has ignored the recommendation to index MGNREGA wage rate to CPI(RL). This has led to the stagnation of MGNREGA wages in real terms with little increase in nominal MGNREGA wages. The MGNREGA wage of Assam, Bihar, Jharkhand, Uttar Pradesh, Rajasthan, and Uttarakhand was either not increased at all, or increased by just ₹ 1 for 2017–18. This was even questioned by the government of Jharkhand in a strongly worded letter to the GoI.
4. Rationing of Demand
As explained earlier, another adverse consequence of funds crunch is arbitrary rationing of work demand. Studies indicate that while a quarter of rural households participate in the programme, nearly 60% of them would like to work more days but are unable to find work. Of the households that did not participate, 19% would have liked to participate but could not find work.
This widespread direct rationing affects about 29% of all rural household but is particularly pervasive in certain regions (NCAER 2015). 2017-18 has also seen an alarming number of starvation deaths which can be linked to the devastating rural distress. Although MGNREGA employment could have become an important source of economic security for these households, we found that in nearly all 74 cases, despite having a job card, work was not provided to these individuals and households in the last two years.
The Supreme Court in a PIL has also reprimanded the Central Government on the poor performance of MGNREGA by stating that “Both the State Governments and the GoI are directed to make all efforts to encourage needy persons to come forward and take advantage of the scheme. A success rate of below 50% is nothing to be proud of”.
5. Compromising Transparency Provisions of the Act
Mandatory pro-active disclosure of information in MGNREGA, through multiple modes, online and offline, is a legal mandate. While this mandate has begun to be institutionalised through its real-time, transaction-based MIS to some extent, however, disclosure of information to workers (the primary stakeholder) in an accessible manner continues to be suppressed.
MGNREGA is one of the few programmes that can be subject to public scrutiny, given the sheer amount of information related to its implementation and status, that is supposed to be in the public domain. However, the MIS is being routinely tampered with by the Central Government without any record of decisions and public accountability in the following ways:
(a) The law requires government to pay unemployment allowance to those who demand work and fail to get it in 15 days. Despite evident difference between work demanded and employment provided, the unemployment allowance is rarely paid.
(b) Projected labour budget of previous years submitted by states have been manipulated to match the amount of funds available.
(c) Hidden restrictions on programme implementation such as preventing demand registration or generation of attendance records if the district has exceeded its arbitrary cap of funds, are imposed through the MIS.
(d) The MIS is being blatantly used to absolve the Central Government from its legal obligation of timely wage payments.
Similarly by not including “Stage 2” in the MIS based calculation for delay payment compensation, the centre is avoiding its own responsibility to pay compensation. The MIS which can be a tool for both transparency and efficiency in digital governance, is instead being used to centralise control and conceal the liabilities of government.
6. Interventions Needed
The strengthening of MGNREGA should be an urgent priority of the government and should formally be included it as part of the set of measures being considered to deal with the current rural and agrarian crisis. We recommend the following:
  • Take all measures to register demand, provide dated acknowledgement receipts and open adequate works to meet this demand. 
  • Ensure that adequate and timely funds are provided to meet work demand. Budget approved in Parliament is only an estimate and cannot become a ceiling on funds. 
  • Ensure MGNREGA wages are not less that statutory minimum wage of the state. 
  • Wage payment delays beyond 15 days at the level of both central and state government are separately calculated, disclosed and compensation paid for the full extent of the delay. Make all financial institutions and payment agencies accountable under the Act. 
  • Rate of delayed payment compensation must comply with the Payment of Wages Act. 
  • All financial, technical and administrative constraints on demand registration and wage payments for work done must be removed. 
  • Every Gram Panchayat must have at least one labor intensive public work open at all times. 
  • All information pertaining to program implementation must be made publicly available through the website and offline. The MIS must comply with provisions of the law.
  • Increase MGNREGA legal entitlement in all drought notified districts to 200 days. 

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