States slash spending on material to increase income for poor under MGNREGA

Several state governments have used the funds allotted to employ more people under the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA).

In the process, they have severely curtailed the spending on material, as per data available on MGNREGA.

The Act provides for the wage and material costs to be in the proportion of 60:40. For instance, if the cost of a project is Rs 100, the wage expenditure should be at least Rs 60 and the expenditure on material Rs 40.

Skewed funds

However so far under the current fiscal, the funds are seen to be skewed on the wages side. In several states, more than 80 percent of the scheme's funds have been used for wage payments.

In labour rich Uttar Pradesh and Rajasthan, expenditure on material, in this fiscal so far, has been nil.

In Chhattisgarh and Jharkhand, wages have constituted 73 percent and 97 percent of the funds spent respectively. In Karnataka and Madhya Pradesh, 81 and 85 percent of the funds used so far have been for making wage payments.

The total expenditure under MGNREGA by states, as on June 15 under this fiscal, stood at Rs 19,62,689 crore; around 74.77 person days have been generated so far.

Rural employment slump

Given that there has been a slump in employment under the rural employment scheme in this fiscal, it appears that the governments may be diverting the funds for material expenditure to provide for the wages.

For the month of May, employment under MGNREGA has dropped 48 percent from a year ago.

While 50.83 crore persons were provided work under the scheme in May 2020, the figure has now almost halved to 26.38 crore persons.

MGNREGA stipulates that state governments are required to provide work to a registered applicant within 15 days of the demand, failing which an unemployment allowance is payable by them.

The Act specifies that the rate of the allowance must be fixed by state governments in consultation with State Councils. However, it should not be less than one-fourth of the wages for the first 30 days of unemployment and half of the wages beyond this.

MGNREGA stipulations

MGNREGA guarantees at least 100 days of employment in a financial year to unskilled rural households at a predetermined minimum wage rate. It is widely credited to have provided a safety net through work opportunities to millions of workers, who shifted back to their hometowns and villages after having lost jobs in the wake of COVID-19 in 2020.

For the fiscal year 2021-22, the government had allocated Rs 73,000 crore to MGNREGA. It is 34.52 percent lower than the revised estimate (RE) of Rs 1,11,500 crore for 2020-21.

The government had allocated Rs 61,500 crore in 2020-21.

To provide work to migrants returning from cities to villages, the central government had pumped an extra Rs 40,1000 crores to MGNREGA to ensure that the migrants do not face unemployment during the nationwide lockdown. However, no such amount has been provided yet in this fiscal.

The Mahatma Gandhi Employment Guarantee Act, 2005, is a labour law and social security measure that aims to guarantee the 'right to work'.