Amid agri crisis, pain for rural India as Modi govt chokes MGNREGS funding

Bachcha Lal’s shirt hung loosely over his frail body, exposing his sunken collarbones, as he stood outside his straw-thatched home in central Uttar Pradesh’s (UP) Bundelkhand region. “They all rely on me,” he said, pointing towards his tubercular son, daughter-in-law and grand-daughter. Illiterate and a landless labourer, 65-year-old Lal makes about Rs 175 a day when he finds work digging ditches or building roads under the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS).

“When the government first presented the MGNREGS to us, I thought that we’d get our money on time. I thought that I wouldn’t have to deal with abuse or unnecessary altercations, and that I’d be able to work well since it was a government initiative,” Lal told IndiaSpend. His experience could not have been more different. “We don’t get our wages on time. We could work for two days, but then remain unemployed for the next month or even the next year and a half or two years,” he said.

Launched in 2006, MGNREGS, the world’s largest rural jobs programme, guarantees 100 days of unskilled work to rural Indians such as Lal. It has 110 million active workers, and the wages it pays are an important source of income in Indian villages at a time when the farm sector is in crisis, more villagers are working as farm labour than as cultivators, and non-farm jobs are not enough to accommodate the large number of people entering the labour force.

Starting today, IndiaSpend will analyse the successes and failures of this scheme, and the challenges it faces, in a three-part series. This first part analyses budget allocations to find that despite heightened farm unrest, this year the government has set aside the least proportion of money for the scheme–48% of the budget of the rural development ministry–in the three years since 2016-17.

Reduced funding has resulted in 48% fewer projects getting completed over the six years to 2016. Although expenditure on wages now constitutes 73% of expenditure against the stipulated 60:40 wages-to-materials ratio under MGNREGS guidelines, delays in wage payment are frequent, as the second part will explore.

The final part will focus on how women in the state of Kerala have benefitted from MGNREGS, and what lessons that holds for policymakers.

This investigation is part of IndiaSpend’s series on the government’s performance on key flagship programmes in the run-up to the 2019 elections.

Inadequate funding

“There is massive under-funding of [MGNREGS] by the Centre leading to dilution of the programme,” Rajendran Narayanan, assistant professor at the School of Liberal Studies at Azim Premji University (APU), told IndiaSpend. He said allocation for MGNREGS as a percentage of gross domestic product (GDP) has steadily fallen–in 2010-11, it was 0.53% of GDP, and in 2017-18, 0.42%.

Adjusting for inflation and percentage of GDP (1.3-1.7%), the allocation for 2017-18 should have been no less than Rs 710 billion, Narayanan said. The actual allocation was Rs 480 billion.

Making this Rs 480 billion allocation, the government had claimed it was the highest ever. However, the programme had accumulated arrears of close to Rs 116.44 billion from the previous year that had to be paid, Narayanan said, adding that after taking out the arrears, the allocation amounted to about Rs 360 billion.

The allocation for the current year, 2018-19, is no more than last year’s revised estimate (additional funds requested beyond the budget allocation to meet excess expenditure) of Rs 550 billion.

As a proportion of the rural development ministry’s expenditure, too, MGNREGS spending is now the lowest in three years. In 2012-13, the share of MGNREGS was 55% of the ministry’s allocation. Since then, it has dropped seven percentage points to 48%.

The central government is responsible for 96% of MGNREGS implementation costs, as per the scheme guidelines: it pays the wages for unskilled and semi-skilled labour, and up to three-fourths of the cost of materials used. The state governments pay the unemployment allowance and the remaining cost of materials.

An applicant is entitled to an unemployment allowance if they are not given work within 15 days of their application being received. The allowance is at least one-fourth the wage rate for the first 30 days and not less than half the wage rate for the remaining period of the financial year.

Between 2012-13 and 2017-18, no more than 10% of households got 100 days of employment each fiscal year, defeating the professed objective of enhancing livelihood security in rural areas.

In 2017-18, the households provided 100 days of employment fell further by four percentage points to 6%, compared with 2012-13, as per figures available on April 28, 2018.

When MGNREGS expenditure overshoots the allocation by the central government, state governments make up the shortfall, which becomes a ‘pending liability’ for the Centre–the arrears mentioned above–this brief from Accountability Initiative explains. The cumulative liabilities until 2017-18 amounted to Rs 126 billion, twice the liabilities of Rs 63.55 billion in 2015-16.

Assets created are useful, but few projects get completed

The scheme is designed to generate employment and create durable assets in rural areas.

With expenditure overshooting allocated budget, asset creation has been affected, largely due to payment delays.

“I do digging work mostly [under MGNREGS]. I worked as a farm labourer before this,” Lal told IndiaSpend in November 2017. Since MGNREGS employs unskilled manual labour, workers like him are often involved in digging-related works for soil conservation, horticulture, creation of sheds and farm ponds, etc.

All such works fall under the natural resource management (NRM) component of MGNREGS, which account for 100 of the 153 kinds of projects that can be undertaken under the scheme. Of all NRM projects, 71 are water-related works such as creating recharge wells, water harvesting structures and check dams.

Thanks to NRM projects, 78% of households reported an increase in the water table, ranging from 30% in Muktsar in Punjab to 95% in Vizianagaram in Andhra Pradesh, according to a 2017 study of 30 districts in 29 states conducted by the Institute of Economic Growth, a think-tank.

Further, 66% of households said there was more fodder available after water-conservation projects on public and private lands belonging to marginal and small farmers (farmers who cultivate up to 2.5 acres and 5 acres of land, respectively).

Verification of 926 MGNREGS wells across six randomly selected districts in Jharkhand found that 60% of sanctioned MGNREGS wells were completed, according to this May 2016 Economic and Political Weekly report. Nearly 95% of completed wells were being utilised for irrigation, leading to a near tripling of agricultural income.

“Assets do get created on the lands of small and marginal farmers,” APU’s Narayanan said, “For example, land leveling is something that a farmer can requisition from the gram panchayat. It isn’t true that only large farm owners are benefiting from the scheme.”

However, nearly 12% of all sanctioned wells were abandoned before completion reportedly due to payment-related issues, the report said.

The scheme is designed so that material ratios are lower than labour or wage costs, Avani Kapur, director of Accountability Initiative, told IndiaSpend, citing as examples works such as water conservation, pond digging and tree plantation that require little material input. “Programmes in which material costs are significant, such as sanitation or housing, are usually run as convergence programmes with existing schemes,” she said.

The gram sabha (village council) selects the works to be undertaken in the panchayat, and is expected to uphold the spirit of MGNREGS’ demand-driven approach. Often, this is not the case, however.

“If asset creation becomes targets-based and top-down, then one will hazard creating assets that are not useful,” said Narayanan, “How can somebody sitting in the state capital know or decide what is best for a gram panchayat that is far away?” The law under which MGNREGS operates clearly intended a gram panchayat-led, demand-driven scheme, he added.

At the same time, the quality of works has also been a cause for concern. One of the fallouts of low fund allocation of late has been that the recommended labour-to-material ratio of 60:40 has not been maintained.

The percentage of water conservation and water harvesting projects completed fell from 57% in 2009-10 to 2.5% in 2016-17. “Once you close a work officially, it becomes very hard to reopen (you’ll have to get three types of sanction–technical, administrative and financial). That is one reason for the percentage of works completed to remain low,” said Reetika Khera, an economics professor at the Indian Institute of Technology in Delhi.

The proportion of works completed has mostly remained below 50% through the 12 years of MGNREGS, and has been falling in recent years. In 2016-17, work completed dropped nearly 13 percentage points to 2.74%, from 15.6% the previous year. The present allocation is unlikely to improve the situation.

Wages unpaid

“They owe me Rs 6,000 for the work I have done,” said Sukhrani, a 50-year-old woman who goes by one name, sitting on a charpai (string bed) in her small, unplastered home in Mavai village in Banda district. She said two people in her family have enrolled under MGNREGS. “It’s been two months we haven’t been able to afford milk. We scrounge and borrow to feed ourselves. We don’t even have slippers,” she said, “Sometimes we sell or rent parts of our field.”

Delays in wage payment have been a constant throughout MGNREGS implementation. The guidelines recommend that wages be paid within 15 days of closing of the ‘muster roll’, the attendance register for a site.

However, a recent study by Azim Premji University has found that 78% of payments were not made on time, and as many as 45% payments did not include compensation for delayed payment as per guidelines.

Government data show the percentage of wages unpaid increased from 63.5% in February 2018 to 85.5% in March 2018 to 99% in April 2018, which part two of this series will explore in greater detail.

This is the first of a three-part series on the successes and failures of the Mahatma Gandhi National Rural Employment Guarantee Scheme.

Reprinted with permission from IndiaSpend.org, a data-driven, public-interest journalism non-profit organisation