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MNREGA funds hike is just 1% and here’s why #Budget2017

Union Budget 2017

Union finance minister Arun Jaitley presents the Union Budget 2017-18 in Lok Sabha on Wednesday. (PTI Photo / TV Grab )(PTI)

In his budget speech on Wednesday, finance minister Arun Jaitley announced a record allocation of Rs 48,000 crore for the Mahatma Gandhi National Rural Employment Guarantee Act (MNREGA) – prompting the obvious questions:

a) Is it really a record?

b) What were previous allocations like?

c) Is it enough?

Record: Yes or No?

In absolute numbers, yes.

But things get complicated from here on.

Jaitley’s allocation is indeed the highest-ever budgeted allocation for the MNREGA, and a 26% hike over the previous year’s budgeted allocation of Rs 38,500 crore – a scheme his Prime Minister, Narendra Modi, once derided as a “monument to the failure” of the previous United Progressive Alliance regime.

Yet a quick perusal of MNREGA accounts reveals that the total allocation for the scheme for 2016-17 was actually Rs 47,499 crores, once we include two supplementary tranches totally Rs 8,999 crore injected in August and December last year.

In this context, the actual increase for 2017-18 appears to be a far more modest Rs 501 crore, or a one percent increase, unless the government introduces supplementary allocations this year as well.

The big increase that has everyone excited was actually last year.

Why were supplementary allocations granted?

The MNREGA is a demand-driven programme, and so states must – by law – provide employment to anyone who asks for it, up to a maximum of 100 days per person per year.

Hence, states often spend beyond the allocated amount.

However, years of under-allocation – in 2012-13, the allocated was just Rs 29,387 crore, Rs. 33,000 crores in 2013-14 and 2014-15, and 36,967 in 2015-16 – have meant the scheme has run-up sizeable deficits that are rolled forward every year, with a portion of each year’s allocation eaten up by the previous year’s unpaid expenditure.

The paucity of funds meant that pending payments, which were just 932 crores in 2014-15, ballooned to about Rs 7,000 crores till date in 2016-17, according to analysis by the Centre for Policy Research.

This pending Rs. 7000 crores will eat into Jaitley’s allocation, making less funds available for commissioning fresh works.

So it this record allocation enough?

“It is hard to know,” said Avani Kapur, a Fellow at the Centre for Policy Research, who has studied MNREGA allocations and expenditure for the past eight years, “Total expenditure for 2016-17 is already Rs 53,594 crores.”

Thus, Jaitley’s record allocation of Rs 48,000 crore for 2017-18 does not even cover the cost of the MNREGA for the current year.

But this year’s allocation suggests that, after years of starving the scheme, the government is re-thinking its significance.

“To government’s credit, it is at least acknowledging the need to increase MNREGA allocations and expenditures,” Kapur said.

At first glance it would seem as if the Finance Minister’s announcement of an allocation of Rs 48,000 crore for the Mahatma Gandhi National Rural Employment Guarantee scheme is a dramatic increase of nearly 25% over last year’s allocation of Rs. 38,500 crores. In fact, the increase is a mere 1%, of Rs 500 crore, as two supplementary allocations during the course of the year made the total budget of 2016-’17, Rs 47,500 crore.

Regardless of the budget allocation, what needs to be understood is that for the MGNREGA to work as per the legislation, it needs to have adequate resources to be made available for work to be provided on demand. As of today, 22 out of 34 states have negative balances. As per the ministry’s own data a total of Rs 3,469 crores in pending liabilities have already piled up, even as they have spent 93% of the funds available for this financial year. This is likely to dramatically go up over the next two months, as traditionally demand for work has peaked during this season.

The Supreme Court has issued a series of strong orders in the ongoing Swaraj Abhiyan Public Interest Litigation, one of which stated, “the Government of India is directed to release to the State Governments adequate funds under the Scheme in a timely manner so that the ‘workforce’ is paid its wages well in time. The Government of India must shape up in this regard.”

Despite this, as per the Ministry’s mechanism of preparing indicative labour budgets, even to honour only the approved budget for the months of February 2017 and March 2017, nearly Rs 10,013 crores would be required (at the average cost per person day of Rs 228). This means that we would end the year with close to Rs 13,482 crores in pending liabilities, and a budgetary allocation that has not even kept pace with last year’s amount in real terms.

This unpredictable under resourced fund flow mechanism has implications for implementation, particuarly timely payment to workers, which greatly affects faith in the employment guarantee. The Supreme Court order emphatically stated that delayed wages were unacceptable and a violation of the rights of workers. Yet this continues with impunity. At present 54% of the wage payments continue to be delayed, and as a result Rs 231 crores of compensation to workers also remains due.

For casual workers suffering from the distress of demonetisation, the MGNREGA is intended to provide livelihood security net for exactly such situations. However, with pending liabilities already piling up, the situation is likely to get worse in the next two months as budget releases will only be made in April. Further, the notification for the requirement of aadhaar for accessing work under the MGNREGA from the next financial year, again in violation of repeated Supreme Court orders to not make aadhaar mandatory, is likely to have massive disruptive and exclusionary effects. The People’s Action for Employment Guarantee demands that the Supreme Court orders on Aadhaar and adequate funding be followed, the notification on mandatory Aadhaar be revoked and the adequate funds be made available to the MGNREGA to truly function as a demand based programme.

Signed by Aruna Roy, Mazdoor (Kisan Shakti Sangathan), Nikhil Dey (Mazdoor Kisan Shakti Sangathan),

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Comment (1)

  1. K SHESHU BABU

    One of the most successful programmes of the previous government is the flagship policy MNREGA which provides employment and working wage for the rural poor. It should get maximum allocation for the welfare of the poir

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