MGNREGS – an appraisal

The Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS) was a flagship program launched by the Government of India in 2006. It was designed to provide at least 100 days of wage employment in a financial year to every rural household that needs/demand a work. As conceptualized, MGNERGS was a very important step in driving rural employment and thus alleviating poverty in the country. This document is a critical appraisal of the implementation of the scheme. Data used in the article are all government reported data.

GoI allocation: the union budget 2019 allotted Rs 60,000 crores for the MGNERGS. This was approximately 2% less than the allotment for the previous FY. Although, the overall allotment for the ministry of Rural Development witnesses a 5% increase in the same period.

Union Budget allocation last 5 years (in Rs crores)

Release of allotted funds has been consistently high. For FY’18-19, till Jan’19, 88% of allotted funds have been already released by the central government.

Pending financial liabilities: As MGNREGS is a demand-driven scheme, there are not state wise fixed allocated funds. Release by center to states happens basis labour budget estimates prepared at the start of the FY and actual demand for work during the year. Additional expenditure incurred by states, over and above the funds available to them is known as pending liabilities. This is reimbursed by the GoI. These liabilities have accumulated due to delays in payment of both labor wages as well material costs. From Rs 724 crores in FY’14-15, pending liabilities have increased to Rs 5932 crores as of 31st Dec, 2018, out of which Rs 1405 crores was pending wages.

Pending Liabilities by year (in Rs crores)

Wage payments – delays: According to MGNREGS guidelines, wages must be paid within 15 days from work completion and closure of muster roll. The MGNREGS payment process is divided into two stages. In stage I, payment orders are electronically generated and signed by local authorized signatories. Stage II is sending of the payment orders to center which then disburses the funds to bank/post office accounts of the worker through the National Electronic Fund Management System (Ne-FMS). The MGNREGS MIS however, considers the period from closure of muster roll to sanctioning of payment order by local authorities while measuring adherence to the 15 day benchmark. Going by the MIS data, as of 31st Dec, 2018, 90% of all pay orders for FY’18-19 were released within 15 days. A study conducted by Rajendran, Dhorajiwala and Golani in 2017 though found that significant delays existed between release of pay orders and actual credit of wages. Using MIS data, the authors studies 9 million transactions in FY’16-17 and found that in only 21% cases, wages were credited into accounts within 15 days. For the first 2 quarters of FY’17-18, in 32% of cases, wages were credited within 15 days, the study found.

Notified wage rate vs Wage paid: Vide section 6(1) of the MGNREG Act of 2006, GoI may notify minimum wage rates for states in each financial year. The individual state government may choose to pay a rate higher than the GoI specified minimum rate. A look at the figures for FY’17-18 show that many of the states paid average wages less than the notified wage rate.

Notified vs Average wage rate for FY’17-18 (data for available states)

Employment demanded vs provided: On average over the last 5 year period, 89% of employment demand was provided through MGNREGS. On average, 0.5-0.6 crore households were not able to secure jobs in every FY.

Employment demanded vs received (L5Y)

The core objective of MGNREGS was to generate minimum 100 wage days.FY for every rural HHLD in search of work. Yet in reality, in none of the last 4 years, the no. of average person-days created per HHLD has crossed 50:

2015-1649
2016-1746
2017-1846
2018-19 (till 31-Dec’19)41
Workday generation per HHLD by states

Work completion rate (WCR): There has been an alarming drop in work completion rate over the years.

In the year FY’18-19, Mizoram (52%), MP (51%), TN (32%) and Andhra (30%) were the better performing states on work completion rates. The worst performing states were Assam, Kerala, Punjab and Goa where WCR was <5%.

CONCLUSION: The MGNREGS though started with a noble objective and a fundamentally sound plan, has struggled to make the desired impact mainly due to improper and faulty execution at the ground level. The effective implementation of MGNREGA is critical for driving rural employment and thereby rural demand. Of topmost priority is to clear the pending wage bill which has been announced as a stated objective by the GoI by end of the year. Also important is re-visit the current system of measuring delay in wage release and update it to benchmark vs. actual payment credit, thus helping in eliminating delays.

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