Questions on MGNREGA budget estimation

News: The disappointing allocation for the Mahatma Gandhi National Rural Employment Guarantee Act in the FY 2022-23 budget has created a buzz.

Government’s allocation for MGNREGA has been much lower than what State governments ask for and civil society actors had recommended.

For instance, The initial allocations in the past two FYs have been just about half of what was recommended by groups like the People’s Action for Employment Guarantee (PAEG) and NSM (NREGA Sangharsh Morcha).

Why is the government’s allocation so much lower than what State governments ask for and civil society actors recommend?

Firstly, the issue of underestimation of the projected person-days.

Projected persondays are the total days of work anticipated for the year. For instance, the projected persondays for Q4 in FY 2021-22 appeared to be strangely and significantly lower than that in Q3. Also, there seems to be no clarity on how this projection was arrived at.

Since budget allocations are based on projected persondays Underestimated projections will lead to inadequate allocation.

Secondly, the official MGNREGA daily wages also contribute to keeping the budget low.

According to the NREGA ‘At a Glance’ report, the average MGNREGA wages paid this year remain at a meagre ₹209 per day. Whereas, the expert committee (under the chairmanship of Anoop Satpathy) suggested a need-based national minimum wage of ₹375 per day as of July 2018. Even the PAEG recommended a minimum wage of ₹269 per day in its recently released pre-budget brief.

Even if we take the wage rate of ₹209 per day, the government’s estimated expenditure will be ₹1.19 lakh crore by the end of this FY. And yet, the government has allocated only ₹98,000 crores (₹73,000 crores in the initial budget plus ₹25,000 crores as supplementary grants) for the FY.

How it has impacted the MGNREGA Scheme?

First, the consistent shortage of funds has caused a situation endemic to MGNREGA. For example, deficits for State governments, long delays in wage payments, decline in the work provided in the last two-quarters of the FYs, and significant pending dues at the end of the FYs. Further, less than 5% of households active this year have completed 100 days of work.

Second, the Centre’s approach has eroded the very premise of employment guarantee as a legal right.

Any rural household can demand to work up to 100 days every year, and the government has to provide it. As and when the demand arises, the government must fulfill it. In this context, treating the budget allocation as a ‘ceiling’ to the work that can be provided erodes the core premise of the scheme.

What is the way forward?

Increasing the financial allocation: For FY 2022-23, PAEG had recommended a minimal allocation of ₹2.64 lakh crore, and NSM had recommended ₹3.64 lakh crore.

Provision for Supplementary Grants: MGNREGA funds must be regularly replenished by supplementary grants provided based on actual work demand in each State

Source: This post is based on the article “Questions on MGNREGA budget estimation” published in The Hindu on 22^nd   Feb 2022.