‘MGNREGS allocation should be no less than ₹1 lakh crore’

In an email interaction with Businessline , academics Nikhil Dey, Rajendran Narayanan, Rakshita Swamy and Mukesh Goswami share their views on key aspects of MGNREGA implementation. Excerpts:

Inadequate fund allocation

The Budget estimate for 2020-21 at ₹61,500 crore is ₹9,500 crore less than the revised estimate (RE) for 2018-19. This comes when rural distress has risen to alarming levels. Rural unemployment has increased since 2011-12 and overall unemployment is the worst in 45 years. The situation is much worse for the landless depending on casual manual labour, who constitute more than half the rural population as per the Socio Economic and Caste Census 2011 (SECC) of 2011.

The cut in budgetary allocation is taking place when the minimum allocation needed to protect the MGNREGA as status quo is ₹85,927 crore. This in itself is a suppressed figure because it does not include the amount of pending liability that might be due at the end of this year for wages, material and administrative cost.

The calculation used to arrive at the ₹85,927 crore is as follows:

Considering ₹268 as the cost of generation of one ‘person day’, by accounting for an increase of 8 per cent from previous year’s cost of generation of one ‘person day’ (₹248) due to wage indexation to price rise and inflation;

Considering 270 crore person day as the approved labour budget as of 2019-20;

Total financial allocation required to meet wage payments for approved labour budget would amount to ₹72,360 crore, taking the above points into consideration;

On an average, 25 per cent of the total expenditure has been for material costs (this could go up to 40 per cent). This translates to 0.25*72,360 = ₹18,090 crore for material component. As per the Act, 75 per cent of the material cost has to be borne by the Centre. Thus, the material cost to the Centre is 0.75*18,090 = ₹13,567 crore.

The total allocation required by the Centre for wages + material (₹72,360 crore + ₹13,567 crore) = ₹85,927 crore

Wage rates of MGNREGA are lower than minimum wages in most states. If these basic factors are taken into account, the minimum allocation required to implement MGNREGA, enabling a demand based guarantee of 100 days work , should be no less than ₹1 lakh crore.

Suppression of labour budget

The Labour Budget is only an anticipation of the expected demand. Nowhere does the law mandate that a labour budget is the upper level of work demand for which funds ought to be provided. However, the government through executive powers has brought about a system of “projected labour budget” and “approved labour budget”. States are required to submit the “projected labour budget” and request for appropriate funds from the Centre. The Centre then usurps the power of rationalising funds and “approves” labour budgets for each State by cutting down projected labour budgets.

Therefore, by “approving” a labour budget to each State, the Centre runs MGNREGA like a traditional central sector scheme, instead of a demand based legislation. Such fund starvation has meant that delays in payment of wages continue. The central government, it appears, continues to take around 2 months to release wages to workers whereas the payments have to be made within 15 days of completion of work as per the Act.

Asset creation under MGNREGA

Evidence on MGNREGA assets suggests a different narrative from the ‘dole-hole’ view of sceptics. Over 20 million assets under NREGA have been completed. Sudha Narayanan of Indira Gandhi Institute of Development Research (2016) classifies the findings pertaining to the impact of assets into four meaningful dimensions — augmenting rural incomes, augmenting agricultural productivity through investments in land and water, building environmental resilience through plantation, mitigating natural disasters.

In a drought-prone area such as Kadapa district of Andhra Pradesh, the construction of trenches via MGNREGA has increased water availability for irrigation which has increased farm incomes. Studying over 140 best performing water conservation assets in 75 villages across four states, Shilp Verma and Tushaar Shah (2012) show each of them recovered the investment within just one year of use.

A survey of over 4,100 assets and over 4,800 users across Maharashtra (Narayanan et al . 2014) show farmers viewed water conservation and harvesting works through MGNREGA as enablers of crop production and expanding area under cultivation. From the lens of socio-economic gains, infrastructure work such as the creation of roads, panchayat bhavans, cremation structures, etc., have gained traction among people.

However, they are not natural resource (NR) based. By studying a mix of NR (farm bunding, tree plantation, wells) assets and non-NR (road, toilets) assets in two sample districts of Madhya Pradesh, Anjor Bhaskar et al . (2016) estimate the ‘greenness’ of NREGA works. By creating a ‘green index’, they find that MGNREGS is fulfilling its potential of creating “green jobs”. For example, three years after the construction of a farm bund in Harbhajan Dhurve’s farm in Chhindwara, there’s been a two-fold increase in agricultural output leading to savings of 155 kilolitres of groundwater annually; 33 percent reduction in water extraction.

This, in turn, meant that there was less use of pumps to extract water and thus significantly reducing diesel consumption and leading to an overall reduction of 416 kgs of carbon-dioxide emissions. All these positives are recorded at a time when MGNREGA is functioning at half its intended capacity.

Social audit

The National Institute of Rural Development completed a national analysis of the functioning of Social Audit Units and Social Audits across the country. It says while audits have been done in 51 per cent of gram panchayats , the audit findings have been entered only for 37 per cent of the audits. A total of 7,29,995 issues were reported by 22 states. Process violation issues were the highest (40 per cent), followed by financial misappropriation issues (24 per cent), financial deviation issues (19 per cent) and grievances (17 per cent). In 2017-18, MoRD decided to give funds for social audit directly to SAUs instead of asking states to give it from their administrative funds. This has ensured that SAUs get the funds they need though there have been some delays in few states.