The Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) – a flagship welfare scheme of the erstwhile UPA dispensation launched in 2005 – has come under rigorous scrutiny by Modi government with a view to bring it in line with its agenda for inclusive development.
Already, based on an examination of all facts regarding working of the scheme, the ministry for rural development (MoRD) has finalized a note for consideration by the cabinet. So, what are proposed changes? Before we take a look at that, a few words about basics of MGNREGA are in order.
MGNREGA provides for ‘guaranteed’ employment to a member of a poor family for a minimum of 100 days in a year and pay wage @ Rs 100 per day. For this purpose, state undertakes public works viz., irrigation/water conservation, road construction, building houses, digging tube wells, constructing toilets etc.
Besides wage component, the scheme has provision for expenses on equipment and other materials. At present, the ratio of wages to material is 60:40. This means that out of every rupee spent on a work program under MNREGA, 60 paise is on payment of wages and 40 paise on materials.
Even if government is not able to set up a work program where a person could be given a job, he still has to be paid. By assuring payment of wages even when there is no work, the scheme frees him from all vulnerabilities and uncertainties. Clearly, the guarantee stretches to a point of ensuring complete financial security.
Started with a few select districts, the scheme now covers the entire country. During last 5 years, Government spent a mammoth more than Rs 200,000 crores. For the current year 2014-15, the budget has made an allocation of Rs 33,353 crores.
While continuing with the scheme, Modi government has proposed two changes. First, it seeks to alter wage to material component to 51:49. This means that out of every rupee spent on a work program, expenses on wages will be 51 paise and on materials 49 paise. Second, the scheme will be implemented only in states with low per capita income.
To understand the genesis of these amendments, one has to look at Modi’s philosophy and approach towards development. He believes in creating employment opportunities by making investment in projects/schemes and make country’s youth employable vide emphasis on skill development.
This is also in sync with the theme of his ‘Make in India’ campaign aimed at attracting investment to rejuvenate the sagging manufacturing sector. Likewise, his exhortation to farmers to produce not just to feed Indians but also the whole world is founded on the premise of boosting investment in agriculture.
In short, he wants money to be spent in a manner that leads to creation of permanent assets – be it in agriculture/rural areas, infrastructure or manufacturing – which can serve as harbinger of sustained employment of ever expanding work force.
This is in sharp contrast to UPA’s sole obsession with doles/subsidies to all and sundry which also got ingrained in crafting of MGNREGA. The scheme is heavily biased towards wage payments relegating asset creation and employment generation to the backyard. This bias is reflected in extant wage to material ratio of 60:40 as a rule. In actual implementation however, in certain pockets the wage component had gone up to 75%.
An audit of the scheme has revealed large-scale irregularities viz., money not reaching out to intended beneficiaries; fictitious payments to non-existent persons ; substantial under-payments and work for much fewer days as against guaranteed 100 days. Such rampant mis-use is inevitable in programs whose predominant focus is on distribution of state largesse per se.
This is a dangerous trend and work programs conceived and executed in such manner (could even be on paper) can never create avenue for employment on a sustained basis. Indeed, the day money flow from state treasury ceases, that will put an end to financial security of poor as there won’t be any asset to support jobs.
The objective of present government is to change this culture of subsidies/doles per se to investment in job creation. Since maximum scope for employment is in agriculture, in budget for 2014-15, it emphasized on linking MGNREGA to creation of assets in agriculture. The increase in material expense component will reinforce this.
As regards restricting coverage only to states with low per capita income, this should be seen as fostering balanced regional development, a theme that resonated in Modi’s election speeches. Citing poor record of north and north-east states, he lamented that ‘India cannot emerge economically strong as long as its one arm remains weak’.
Despite the noble intentions of contemplated changes, these have come under flak from Congress and a group of economists. The latter have even addressed a strongly worded letter to prime minister to desist from making the changes (MoRD has rejected these outright and is going ahead with its note).
Criticism from Congress is normal as being the originator of scheme, it will naturally resist any attempt to alter its basics. However, for this to come from economists is unusual. They allege that these would not only threaten financial security of workers but also help businesses to ‘unfairly’ cream off state funds. None of these is tenable.
First, far from risking, these amendments will enhance long-term financial security of poor. As regards businesses (supplying material to projects) allegedly benefiting unfairly or otherwise, this depends on how the scheme is implemented. If officials – in charge of implementation – are corrupt, they will pilfer funds irrespective of how much money is kept in either of the baskets viz., wages or materials.
It is not un-common for politicians to quote former PM Rajiv Gandhi that only 15% of money under welfare schemes reaches intended beneficiaries. Apply this to Rs 200,000 crores spent under MGNREGA; it follows that only Rs 30,000 crores reached them. The balance a humongous Rs 170,000 crores would have been appropriated by corrupt politicians and bureaucrats. This menace has to be curbed through improved governance.
As regards the scheme, government is making the ‘right moves’ to restructure it so that it becomes a potent instrument for promoting inclusive development with emphasis on improving the lot of poor and enhance quality of their life.