Driving demand down for rural job scheme

Scheme faces pincer attack with a proposed higher proportion of expenditure on material, reducing the budget available to pay wages and focus on implementing it only in 2,500 blocks

The Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS) faces a pincer attack under the National Democratic Alliance (NDA) government, with parallel moves promising to shrink and mutate the nature of the scheme. Two of the moves have been revealed - a proposed higher proportion of expenditure on material, reducing the budget available to pay wages, and a focus on implementing the scheme only in the poorest 2,500 of India's 6,275 blocks.

The third cut being inflicted on the scheme could be the deepest - unprecedented delay in payments to beneficiaries. Till October 20 this year, about 70 per cent of all payments, totalling a whopping Rs 8,407 crore, hadn't been paid within the statutory 15 days, the most severe delay in the history of the scheme. In 2013-14, about half the workers received payments on time. By October 20 this year, Rs 3,604 crore in wages were due for 15-30 days; another Rs 2,997 crore hadn't been paid for up to two months and Rs 1,199 crore in payments were pending clearance for up to three months. Wages amounting to Rs 607 crore had not been paid for more than three months.

Though states hold the primary responsibility for such delays, the Centre's disinterest in setting strict regulations has let the delays go out of hand. Worse, the statutory obligation of states to compensate workers for delay in payment of wages has now been disregarded almost universally. As of October 20, state governments owed wages for 2.9 billion work days. Besides legitimate dues, they owed Rs 117.41 crore in compensation.

Union government records show Rs 157.66 crore was not paid due to lack of sufficient funds with states. Under the law, states should provide compensation for delay of more than 15 days in payments. But most states rejected majority of compensation claims, paying only Rs 4.8 crore to workers. Only Maharashtra and Andhra Pradesh paid compensation. During the United Progressive Alliance (UPA) regime, the compensation rate saw a drastic cut - to only five paise/Rs 100 of delayed wages, a day.

Sources in the rural development ministry say though the trend isn't new, it has reached "a very unhealthy level" now. The delay in payments was to be resolved by setting up an electronic cash transfer system that would move and track fund flow from the Centre to the last mile. As of now, the system is far from being adopted by states. The reasons for this differ, depending on whom one asks.

It is understood that rolling out the infrastructure to put the system in place will take time. And, hurrying the implementation without the basics in place will only add to more workers being denied payments on time. Two state rural development secretaries Business Standard spoke to cautioned unless there was clarity of the flow of funds from the Centre to states, states were bound to not "risk" making their ends of the payment mechanism "automated".

They mentioned the discretion of the Centre in transferring funds to states. "Demand can be dampened by administrations to some level. The process begins at the time demand is projected and then, how and when the Centre transfers the funds," said one of the rural development secretaries.

A particular case pertains to the time before the NDA government took charge at the Centre. Andhra Pradesh got an unreasonably large grant of the first tranche of funds from the Centre. At Rs 4,235 crore, it was more than twice the sum received by any other state. The startling transfer by UPA government just before it demitted office caught Narendra Modi's attention once he took over as prime minister. That the MGNREGS is bleeding slowly is also visible from another set of data. The falling projections of work the Centre plans to create lay it bare. In 2009-10, the projection by the Union rural development ministry stood at 4.02 billion person-days. For 2014-15, this has been scaled down to only 2.27 billion.

The increase in wage rates through the years camouflages the real fall in the actual volume of work created. "It's a myth that the programme is demand-driven," says an expert who has worked with the government on MGNREGS, on condition of anonymity. The demand shrinks to somewhat fit the budget and projections of the Centre. The ability of the Centre to centralise and squeeze the scheme began with the UPA government. To pare the MGNREGS, the NDA government has decided to use the centralisation lever well.