Allocate Rs 80,000 crore for MGNREGA to overcome monetary drought mounting every day


By NREGA Sangharsh Morcha

As we await the budget allocations for FY 2018-19, Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) is facing another monetary drought with liabilities for wage and material payments mounting every day.  MGNREGA is a demand driven law, which means that money should be provided as per demand. However this is not happening. The allocation of FY 17-18 of Rs. 48,500 crores is long exhausted with expenditure having crossed 50,000 crores, and more than two months still left. While an increase in allocation for FY 18-19 is expected, the total amount required needs to be seen in context, not simply as an increased allocation.

Any budget less than Rs. 80,000 crore will be insufficient to meet even projected demand for work and the timely payment of wages.

It is pertinent to recall that 25%, or close to Rs. 12,000 crores out of the current “record” allocation went to pay off last years dues. For FY 17-18, pending liabilities are already about Rs. 5,000 crores and is bound to rise in the next two months. The budget for FY 18-19 will have to deduct pending liabilities at the end of this year, to present a true picture of funds available for employment next year. Enough funds need to be made available to break this cycle of pending liabilities at the end of financial years.

Only then can timely payment of wages actually be made. As per sample independent studies, the actual wages paid on time in 2017-18 is likely to be around 32% instead of the figure of 85% presented by the Government of India.

Further increasing costs, both for wages and material need to be taken into account. MGNREGA wage rates need to be brought in line with State Minimum Wages as per constitutional values, and as various MoRD committees have recommended. At the very least, wages should be indexed to inflation as per the Consumer Price Index of Rural Labour (CPI-R).

The insufficient budgetary allocation results in the MoRD using various illegal and coercive methods to cut employment and squeeze expenditure on the MGNREGA, thereby violating various provisions of this act with impunity. Many of the issues thus highlighted below, have become matters of great concern, and are being watched by the Supreme Court of India in an ongoing case – Swaraj Abhiyan vs Union of India and others.


Since 2014, many civil society groups have consistently pointed out the pernicious manner in which funds are being squeezed for MGNREGA and the damaging domino effect it has on the program overall as follows:

  1. Restrictions on projected and approved labour budgets – Even though the Act is unequivocal about the fact that Gram Sabhas will determine the quantum and kind of works to be taken up in a given year, this has been relentlessly abused by different state and Central Government. The projected persondays that emerge from such bottom up planning are examined at the Central Government level and are being reduced to an illegal concept called ‘approved labour budget’– contrary to the spirit of the Act. In FY 17-18, the Projected Labour Budget was reduced by 25 % from 288 crore persondays to 215 crore persondays. Calculated at an average cost per day of Rs 240, this amounts to huge deficits in the allocated amount (last column of Table 1). Moreover, funds are not made available to State Governments for even the Approved Labour Budget. Through a series of amendments in the Annual Master Circular, the Central Government has given itself further discretion to withhold funds to State Governments by introducing “mid-term reviews” “internal audit reports” and the “mother sanction order” that strongly undermine the Act. This allows the Central Government to hold back funds without any accountability, even as workers wait for their wage payments after having done hard grueling work.table1
  2. Delays in Wage Payments: It has been consistently pointed out that the Ministry of Rural Development is not recording or displaying delays that occur at its level, or that of the payment agencies (which it is responsible for). Two independent studies, using government’s own data have shown that for the first two quarters of FY 18, rather than the figure of 85% wages paid on time, the actual ratio is likely to be closer to 32%, if central government and payment agencies delays are accounted for. The situation usually worsens in the last two quarters of each year as the meager allocated funds get exhausted by then.table2
  3. No accountability or payment of compensation for delays: Since the full extent of delay is not being calculated, the full amount of compensation due to workers is also not calculated. The accountability of the Central Government and Payment Agencies has not been fixed despite repeatedly pointing it out. Even for the limited amount of compensation that is currently getting attributed only to various State Governments, owing to the Centre’s false definition of what constitutes as ‘delay’, at the rate of 0.05% per day of delay, amounting to a total of 1898 crores (since December 2013), less than 4% has actually been paid to workers. As noted by a report by the Ministry of Finance in August 2017, “In cases of delays in making large number of payments, it has been found that funds have not been available either of Centre & State shares. Proposing compensation for such delays would vastly increase the expenditure.” This is contrary to the position taken by the Ministry of Rural Development in the ongoing Swaraj Abhiyan PIL, wherein the Ministry of Finance acknowledges – “It was found that the delay in payment to states was mainly due to infrastructural bottlenecks, availability of funds and lack of administrative compliance.”
  4. Pending Liabilities: The last six FYs have ended with consistently high pending liabilities, or backlogs of payments. Therefore any true representation of the adequate budget will account for these.table3
  5. Wage Rates: Any budget must also take into account increasing wage rates, due to inflation and the Ministry of Rural Development’s own previous recommendations of indexing wage rates to State minimum wages. Any wage rate below the State minimum wage is a flagrant violation of Article 23 of the constitution and is tantamount to ‘forced labour’ according to a 1983 Supreme Court Order. NREGA Sangharsh Morcha demands a daily NREGA wage rate of Rs. 600 per day.
  6. Centralisations Halting Material and Administrative Costs: Due to centralization of fund release via the Management Information System, fund shortages in the past have led to a halt in material and administrative payments causing havoc in the program at the ground level. Administration of this massive program requires adequately paid and trained staff, which becomes difficult when their wages are arbitrarily stalled for months on end.

Based on a realistic assumption of an increase in India’s tax to GDP ratio in the coming year, it is definitely conceivable to have at least 1% of the GDP reserved for MGNREGA funds. In FY 17- 18, the allocation was a lowly 0.42% of the GDP. MGNREGA workers have had to bear the brunt of shrinking funds, which must be corrected. Further, the mandate to ensure work conditions by providing crèches, water, basic medicines and shade is also specified in the MGNREGA and these amongst other critical provisions must be not be forgotten.

Therefore, an adequate budget for FY 18-19 will account for:

  • Pending liabilities for FY 17-18 which already amount to Rs 4786 crores.
  • Projected Persondays of State Governments, which at the rate of the previous FY will amount to 288 cr persondays average cost per day Rs. 241 = Rs. 70K cr approximately.
  • Inflation and indexation of wage costs, which amounts to 10% approximately Therefore, any budget less than Rs. 80,000 crore will be insufficient to meet even projected demand for work and the timely payment of wages.

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