A lack of sufficient funds, rampant payment delays and abysmal wage rates are to blame
The ₹11,000 crore fraud that diamond merchant Nirav Modi is said to have created is a figure that needs to be put in perspective. The total amount of wages pending under the Mahatma Gandhi National Rural EmploymentGuarantee Act (MGNREGA) scheme for the whole country (2016-17) was around ₹11,000 crore too. This sum is a fifth of the MGNREGA budget announced for financial year 2018-19.
MGNREGA stands out in its worker-centric legislation and stated emphasis on transparency and accountability. Several potentially progressive measures such as a real-time management information system have been put in place. The scheme is meant to be demand-driven in the sense that the government is mandated to provide work within 15 days of a worker seeking work. Otherwise the worker is entitled to an unemployment allowance. A second key provision of the Act pertains to payment of wages within 15 days of completion of work, failing which a worker is entitled to a delay compensation of 0.05% per day of the wages earned. However, both these provisions have been routinely violated. There is an ongoing Public Interest Litigation in the Supreme Court (Swaraj Abhiyan v. the Union of India) concerning these violations. We look at three ways in which a lack of funds has led to a subverting of these provisions in letter and spirit.
First, budget allocation over the years has been insufficient. While there has been an increase in the nominal budget in the last two years, after adjusting for inflation, the budget has actually decreased over the years. The real budget of 2018-19 is much lower than that of 2010-11.
Second, even this low budget allocation has undergone various kinds of curtailment. By December of each year, through a bottom-up participatory planning approach, every State submits a labour budget (LB) to the Centre. This contains the anticipated labour demand for the next financial year. The Centre, on its part, has been using an arbitrary “Approved Labour Budget” to cut down funds requested by States (using the National Electronic Fund Management System, or Ne-FMS), making this a supply-driven programme.
Ne-FMS guidelines issued in 2016-17 say the Management Information System (MIS) “will not allow” States to “generate more employment above the limits set by Agreed to LB”. This meant that the work demand of workers was not even getting registered and the MIS was being used as a means to curb work demand. Thus the “approved labour budget” puts a cap on funds. So, for 2017-18, for example, if one aggregates the requested LB of all States, the minimum budget requirement adds up to ₹72,000 crore. However, the initial allocation was only ₹48,000 crore, which is in synchrony with the approved LB (as on the first week of April 2018).
Because of the ongoing PIL, the Centre was forced to rescind guidelines that enabled the use of the MIS to constrict demand for work. The Centre releases an Annual Master Circular (AMC) each year that serves as a guide to the programme implementation of MGNREGA. The most recent AMC suggests the setting up of an Empowered Committee (EC) to this effect.
The lack of payment of wages on time has meant a violation of the second key aspect of the Act. By analysing transactions (over 90 lakh in 2016-17 and over 45 lakh in the first two quarters of FY17-18), a study on wage payment delays has highlighted how the Centre has completely absolved itself of any responsibility of a delay in the release of wages. Only 21% of payments in 2016-17 and 32% of payments in the first two quarters of FY17-18 were made on time.
In response to the first phase of the study, the Ministry of Finance issued an office memorandum. Acknowledging the validity of the study’s findings, the memorandum also said that the principal reasons for payment delays were “infrastructural bottlenecks, (un)availability of funds and lack of administrative compliance”. The study findings and this memorandum are at odds with the Centre’s dubious claims of 85% of payments having been made on time. The situation worsened in the last six months of FY17-18. Around 25% of the funds transfer orders (FTOs) pertaining to worker wages from January to April this year are still to be processed by the Centre. Last year, the Ministry froze the processing of FTOs (over ₹3,000 crore) due to a lack of funds. In August 2017, the Ministry of Rural Development demanded a supplementary MGNREGA budget of ₹17,000 crore, but the Ministry of Finance approved only ₹7,000 crore, that too in January 2018. The poor are paying a heavy price for this throttling of funds by the Centre.
The third point is about stagnating MGNREGA wages. Delinking of MGNREGA wage rates from the Minimum Wages Act (MWA), 1948 has contributed to this. MGNREGA wages are a less lucrative option for the marginalised, being lower than the minimum agricultural wages in most States. As primary beneficiaries of the Act, women, Dalits and Adivasis could be the most affected and pushed to choose more vulnerable and hazardous employment opportunities. Such contravention of the MWA is illegal.
MGNREGA now faces a triple but correlated crisis — a lack of sufficient funds, rampant payment delays, and abysmal wage rates. What this reflects is not only a legal crisis created by the Centre but also a moral one where the fight is not even for a living wage but one for subsistence. One hopes for a just order from the judiciary.
Rajendran Narayanan teaches at Azim Premji University, Bangalore. Madhubala Pothula is an undergraduate student in the same institution