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How The Modi Government is Killing Off MGNREGS

Funding is not keeping pace with demand, and delays or vanished dues are discouraging job seekers in these times of extreme rural distress.
MNREGA workers

Image for representational use only. | Image Courtesy: Down To Earth

Here is a little known but chilling fact about the rural job guarantee scheme, MGNREGS: between April and mid-December this year, about 1.28 crore people who demanded jobs were turned back. This refusal to give work has been happening every year but it has increased after the Modi government came to power in 2014, and it has already hit a record high with over three months still left in this financial year.

Meanwhile, from different states, there are reports of protests by labourers over delayed wages, blocked accounts, missing money, and no work. There is a deepening sense that the job guarantee scheme – a lifeline for off-season work for lakhs of very poor agricultural labourers and small farmers – is in shambles.

Rural areas are already suffering from immense distress because of a raging agrarian crisis, reflected in diminishing farming incomes, stagnant agricultural wages and rising unemployment with such consequences as increasing indebtedness, suicides and out-migration. On top of that, this strangling of the MGNREGS (Mahatma Gandhi National Rural Employment Guarantee Scheme) has deepened the distress among the poorer sections in rural areas.

What is happening to MGNREGS? Why is there a crisis? Answers to these questions are being demanded across the country.

MGNREGS is being put to a tortured death by the Narendra Modi-led National Democratic Alliance government through a relentless funds squeeze, delays in payments, technological glitches and lack of any avenue for grievance redressal. Analysis of official data and ground reports from across the country shows that an increasing number of people are being refused work every year, the paucity of funds is causing spending to overshoot every year, payment of hundreds of crore rupees are delayed beyond the stipulated time limit of 15 days, delay compensation is not paid despite a clear law regarding this, and aggrieved people have no method of correcting the growing number of technical glitches arising from the electronic fund transfer systems. All this is topped by increasingly novel ways in which corruption is creeping into the system, snatching away hard-earned and precious wages from the people. Let us put some of these features under the microscope to understand the reasons.

Rising Demand, Sinking Availability of Work

The demand for work in the MGNREGS has been rising continuously (see chart below). Driven by increasing joblessness and farming crisis, millions of people including landless labourers and small or marginal farmers seek some meagre income from the scheme. However, the number of persons actually given work is much less than the demand. Last year, 8.4 crore persons sought work, as per records, but only 7.2 crore were given work.


The number of persons being turned back has increased from about 79 lakh in 2013-14 (the last year of United Progressive Alliance-2) to 1.29 crore in the current year (till December 15) as shown in chart below. As a share of all those applying for work, those refused work have increased from about 10% in 2013-14 to a whopping 18% this year.


It should be noted that the number of those who demanded work is as per official records, which is always less than those who actually wanted work but were verbally refused or turned away in any informal way. Many people simply give up going to ask for work because of constant refusal. Official statistics include only those who are recorded as having demanded work through applications.

Although it is repeatedly claimed that the MGNREGS is a ‘demand-driven’ scheme, that is, it responds to and meets all the demand for work, the above official data clearly shows that this is far from the way it is being run. In fact, like all other schemes, it is being restricted through pre-defined limits of spending.

Low Wages, Less No. of Days

Work under this scheme is the least paying, apart from being the most irregular and uncertain. The average wage, according to official data, is just Rs.179.59 per day. There are, of course, wide variations among states with wage rates as low as Rs.141.65 in Rajasthan, Rs.146 in Telangana, Rs.166 in Chhattisgarh, Rs. 170.12 in Madhya Pradesh etc. [Note that the BJP state government recently lost in the three states they ruled.] The richer states have higher wage rates, although Gujarat (a Bharatiya Janata Party-ruled state) has only Rs.175.79.

The average number of days of work given to households has been declining under Modi rule. In its first year, when Modi came out openly against MGNREGS and slashed funds, the average number of days of work dipped to just 40. Due to the wave of protest throughout the country, Modi had to back down and restore some funding, leading to an increase in average number of days worked per household to 49 in 2015-16, and since then it has steadily declined to 46 in 2016-17, 45.76 in 2017-18 and back to 40 in this year. 

With these kind of wage rates, and with the limited number of days when work is available, it is sheer desperation that drives people to go for MGNREGS work. The depth of jobs crisis can be judged from the fact that so many are going for it. But low wages and small number of days of work also discourages many to shun this work. Combined with the delays in getting these wages, it becomes a waste for many people to undertake MGNREGS work. This is not happening because of some unknown factors but because of a policy of keeping wages low and squeezing funds to discourage work.

Delays in Wage Payment

Again, official data shows that last year, about Rs.7014 crore worth of wages were delayed beyond 15 days. This year, the amount so far is Rs.2469 crore but this is likely to rise steeply because it is at the end of the year that dues pile up because of funds not being released or delayed. The Act that governs the scheme stipulates that wage payment cannot be delayed beyond 15 days. Yet official records themselves show this delay. Last year, some 5.6 crore transactions were delayed beyond 15 days.

The primary reasons for delays are two: delay in fund releases from higher levels and delays arising from glitches in the electronic fund transfer system which has been forcibly imposed on the scheme.

What the MGNREGS system records as delays are actually “first-step delays”. They occur before the final signature of a Fund Transfer Order (FTO) and are quite transparent. The whole system is geared to keep track of such delays and compensation is stipulated to be paid for them.

However, such delays are just the beginning of the wage earners’ ordeal. There are unrecorded second-stop delays that happen after FTO has been issued but the bank transfer doesn’t take place. Studies have found that these delays can be for as long as two months.

Economist and activist Jean Dreze has written that one of the reasons for delays is the repeated changes in the way cash payment of wages was changed to various kinds of electronic payments. “First, it was cash payments, then post-office payments, then bank payments, then specific banks, then various avatars of what is now called the National electronic Fund Management System (NeFMS), and now the Aadhaar Payments Bridge System (APBS). None of these innovations, so far, has been able to ensure payment within 15 days of the work being done, as prescribed under NREGA, he writes.

Vanished Wages

The nightmare scenario for a poor labourer is when he/she has worked for a few days and later discovers that due wages are not getting deposited in the connected bank account. This happens because of three reasons: rejected payments, diverted payments and locked payments.

Rejected payments is possible because of an incredible 200 different reasons, according to a Rural Development Ministry official quoted by Dreze. Some of the reasons like “inactive Aadhaar” are not understood even by UIDAI and the rural development ministry. Once a labourer’s wages go into this black hole, the chances of recovery are very low. In any case it will take months. According to the official records, Rs.500 crore worth of hard earned and precious wages were stuck as ‘rejected payments’ in 2017-18.

Diverted payments are those where the wage is transferred to an account that the labourer knows nothing about or even to a wrong account (belonging to some other person). This is a widely prevalent glitch associated with the Aadhaar Payments Bridge System (APBS) under which, wages are automatically paid only into the worker’s last Aadhaar-linked account. Since workers don’t know which of their accounts are Aadhaar-linked, they are unable to locate the money. Alternatively, it may have gone to somebody else – in which case it means goodbye. There is no redressal mechanism and labourers have no means of running around trying to figure out an unknown technological system.

‘Locked payments’ is the third way wages vanish. This happens when wages are transferred to an account that the bank has declared dormant or frozen because it has not been used frequently. Once payment is locked, the labourer cannot withdraw the amount. 

Both delayed payments and vanished wages are not small things for workers. Not only is it a dead financial loss for a family that is on the brink, but it completely discourages them from seeking work again because of fear that a similar loss will again occur.

Funding Chaos

The biggest reason behind the slow murder of the MGNREGS is the behind-the-scene squeeze on funding of the scheme. This is kept under wraps and the data is presented by the government in such a way so as to highlight only the increases. But an analysis of the annual releases and spending data shows that despite the increase in funding, spending is overshooting it every year and, more importantly, liabilities of each year (payments due) are carried forward every year to be paid in the next year. This not only destroys the smooth functioning of wage payments with all its consequences, but it also damages the administrative structure – the staff availability to plan works, the availability of materials – thus further wounding an already suffering system.

Take a look at the data which is drawn from the official website and presented in recalculated easy to understand form below.


Note, that every year, not only is spending actually incurred, it is more than the funds released. But even then, substantial amounts of dues are left pending to be disbursed in the next year. For example, taking 2017-18 as the last complete year, the combined Central and State government allocation was Rs.61,426 crore, but actual spending was Rs.63,670 crore during the year – about Rs.2,244 crore in excess. Then, an additional Rs.1906 crore was pending liability. This was made up of Rs.622 crore of unskilled wages due, Rs.122 crore of materials and Rs.66 crore worth of administrative expenditure. If you add this combined liability to the year’s spending, we get a total expenditure of Rs.65,576 crore – which is an excess of Rs.4,150 crore over the funds released in that year.

What all this complicated math means is that the whole scheme is functioning on less money than needed and it is barely surviving by rolling over payments – that is, delaying them till the next instalment of releases is received.

Note that this survival is dependent on one very important factor – limiting the demand for work. If the work demand increases, the whole system would go into even deeper debt and probably collapse. For instance, if the 1.24 crore people who were refused work had actually been accepted and given work, the additional expenditure would have been about Rs.13,000 crore if given work for 46 days, which was the average for 2017-18. By refusing work to these applicants, the government effectively saved Rs.13,000 crore and also postponed the collapse of the system. 

What Should be Done?

The Modi government has not only severely damaged the economy of the country through its disastrous policies, it is so deeply mired in the neo-liberal dogma of reducing government expenditure on welfare, privatising public resources and opening the economy to foreign capital, that a wholesale overhaul of the policies is needed to increase job creation and improve wages.

The rural jobs guarantee scheme was envisaged as a relief measure to mitigate the distress caused by joblessness. Till such time as a healthy growth in new jobs is not established, it should be necessary for the government to increase spending so that suffering people get some relief through the scheme. Some experts have estimated that at least Rs.80,000 crore should be invested every year in MGNREGS to make it function effectively. Since the Modi government’s term is about to end, it is impossible to expect them to take such measures after having spent five years trying to destroy the scheme. So, the best way would be to vote out the Modi government and bring in a different, more people-oriented government that will create more jobs, and also help strengthen MGNREGS.

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