MGNREGS stares at fund crunch; no additional allocation forthcoming  

MGNREGS faces budget deficit, delaying wage disbursal, material component payout, and impacting future projects in rural India.

The Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS) has not received an additional budget for financial year 2024-25, resulting in delay in disbursal wages to workers. 

As per sources, the Union Rural Development Ministry is falling short of ₹4,315 crore for the wages for which Fund Transfer Order (FTO) has been generated. The Section 3 (3) of the MGNREG Act clearly states that “the disbursement of daily wages shall be made on a weekly basis or in any case not later than a fortnight after the date on which such work was done.”

The Centre also has a liability of ₹5,715 crore against its share for material components. The Centre bears 60% of the cost of the materials used for MGNREGS works and the remaining 40% is provided by the States. The delay in the material component has a domino impact affecting the future projects. When there is a continued delay in material component payout, the local vendors, who supply the raw material become reluctant to supply and thereby break the work cycle.

In the 2024 Interim Budget, the government had allotted ₹86,000 crore for the scheme. Despite being a deficit, the Union Finance Ministry did not revise the budget for the scheme even after several requests from the Ministry.

Last year, responding to a criticism on low fund allocation for the scheme, the government had maintained that the programme is a demand-driven scheme, and the additional allocation is made available whenever needed.

For example, in FY 2020-21, when pandemic forced reverse migration to the villages and the demand for MGNREGS work soared, the government revised the original allocation of ₹61,500 crore to ₹1,11,500 crore, one of the highest jumps ever seen. 

Academics and activists, who are closely monitoring the programme, have said the low budgetary allocation leads to artificial suppression of demand. This problem was also flagged by the Parliamentary Standing Committee on Rural Development in its report tabled in February 2024. “The pruning of funds at Budget Estimate (BE) stage itself does have a cascading effect on various important aspects such as timely release of wages, release of material share etc. which have a telling impact on the progress of the Scheme. The Committee feels that for smooth implementation of MGNREGS at ground level, shortage of funds is a big obstacle which does not augur well for the performance of the scheme,” the panel noted in its report.