Context:  The Finance Ministry has allocated additional funds of ₹10,000 crore as an interim measure for the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS) after it ran out of funds allocated in the budget, according to the Ministry of Rural Development (MoRD). 

Key Points

  • More funds may be forthcoming based on the “assessment of demand.”
  • The scheme’s financial statement on November 25, 2021 still reflects a negative net balance of ₹9,888 crore. 
  • Despite the additional allocations, the funds available for the scheme stand at ₹76,340 crore, well below the ₹86,229 crore which have been incurred as expenditure, including payments due for wages and materials. 
  • The scheme’s balance sheets remain in the red in 24 States and Union Territories.
  • Further allocation may be made upon assessment of demand during the revised estimate stage. These revised estimates will be included in supplementary budget demands made to Parliament when the winter session opens soon.
  • Meanwhile, more than ₹1,170 crore worth of wage payments for MGNREGS workers are still pending.
  • Lack of funds results in suppression of demand for work and delayed payment of wages to workers. 
  • These are violations of the Act; they also constrain economic recovery, said by the 70 economists recently, demanding that additional funds be provided immediately to strengthen and expand the scheme.

Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA), 2005:

  • Objective: The primary objective of the scheme is to guarantee 100 days of employment in every financial year to adult members of any rural household willing to do public work-related unskilled manual work.
  • Adult members of a rural household may apply (to the local Gram Panchayat) for employment if they are willing to do unskilled manual work.
  • The Gram Panchayat after due verification will issue a Job Card to the household as a whole. 
  • Employment will be given within 15 days of application for work by an employment seeker.
  • If employment is not provided within 15 days, a daily unemployment allowance in cash has to be paid. 
  • Liability of payment of unemployment allowance is of the States.
  • At least one-third of persons to whom work is allotted work have to be women.
  • Disbursement of wages has to be done on a weekly basis and not beyond a fortnight.
  • Panchayat Raj Institutions [PRIs] have a principal role in planning and implementation.
  • Work should ordinarily be provided within a 5 km radius of the village or else extra wages of 10% are payable.
  • Social Audit has to be done by Gram Sabha.
  • The different categories of permissible works are as follows: 
  • Water Conservation 
  • Drought Proofing (including plantation and afforestation) 
  • Flood Protection 
  • Land Development 
  • Minor Irrigation, horticulture and land development on the land of SC/ST/ -BPL/IAY 
  • Land reform beneficiaries Rural connectivity.


  • Negative impact of caste-based segregation: While 46% of payments to SC workers and 37% for ST workers were completed in the mandated seven-day period, it was a dismal 26% for non-SC/ST workers. 
    • The negative impact of caste-based segregation was felt acutely in poorer States such as Madhya Pradesh, Jharkhand, Odisha and West Bengal. 
    • In addition to such stark differences, in West Bengal, the Central government kept pending nearly 45% of the wages beyond 15 days as on October 13.
  • Caste-based segregation has also resulted in tensions at worksites
    • It had also resulted in a threefold increase of workload for computer operators at blocks. 
    • After critical media reportage, the Central government has revoked the caste-based segregation of wage payments. 
    • However, the Central government has not assumed any accountability by paying compensation for delays despite the evident damage caused by caste-based segregation of payments.
  • Lack of funds: The Ministry of Rural Development said that currently Rs.8921 crore funds are available which can meet the wage liability. 
    • This statement is misleading as the Ministry has not accounted for pending arrears of ₹17,543 crore from previous years. 
    • There is ample evidence by now that delays in wage payments are a consequence of insufficient funds. 
    • It showed that funds allocation this financial year (FY) is 34% lower than the revised budget allocation of last year. And this year’s funds have been exhausted. 
    • The Chief Ministers of Odisha and Tamil Nadu wrote to the Prime Minister seeking additional funds for MGNREGA.
  • No advantage of technology: According to a report, there is no difference in the time taken for payments through the Aadhaar Payment Bridge Systems (APBS) and traditional account-based payments. 
    • In fact, APBS has given rise to complicated problems like misdirected payments and payment failures due to erroneous Aadhaar mapping with the payment software. 
    • Misdirected payments happen when one person’s Aadhaar gets linked to somebody else’s bank account. 
    • These problems are difficult to resolve even for bank and block officials resulting in increased hardships for workers. 
  • Wage payment process of MGNREGA
    • There are two stages in the wage payment process. 
    • In Stage 1, States must electronically send invoices, also called FTOs, to the Central government within eight days of completion of work at a worksite. 
    • These invoices contain essential worker details like their names and bank account numbers. 
    • Stage 2: The Central government then processes the invoices and transfers wages directly to the workers’ accounts. This is the Central government’s responsibility that must be completed within seven days after Stage 1. 
    • Since Supreme Court orders in 2018, Stage 1 delays have reduced while Stage 2 delays continue. 
    • As per the Act, if Stage 1 plus Stage 2 exceeds 15 days, then workers are entitled to a delay compensation for each day’s delay. 
    • However, in violation of the Act and the Supreme Court’s orders, no delay compensation for Stage 2 is even being calculated. 
    • Instead of ensuring sufficient funds for timely payments, the Central government has repeatedly modified the payment architecture as if payment delays are due to technological hurdles. 
  • Earlier, the invoices were not segregated by caste. Recently, the Central government issued a circular to segregate invoices based on the caste of workers (Scheduled Castes, Scheduled Tribes, and ‘Others’). It was then taken back.
  • Delay in Stage 2: In our sample, Stage 2 was completed only for 29% of the invoices within the mandated seven-day period. 
    • For two-thirds of the transactions in Jharkhand and more than half the transactions in Chhattisgarh, Madhya Pradesh and West Bengal, Stage 2 exceeded 15 days. 
    • There was also a steady increase in Stage 2 delays from July to September indicating depletion of funds.

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