Not only is the government failing to make timely payments, but the Centre’s definition of what constitutes a ‘delay’ is also flawed.
The Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) guarantees 100 days of work in a year for every rural household that demands work. In the current financial year, over 152 crore person days of work has been generated through the programme. The Act mandates that every worker must receive their wages within 15 days of completion of a work week, failing which a delay compensation is to be paid at a rate of 0.05% per day of delay. Not only are there massive delays in payments but the Centre’s definition of what constitutes a ‘delay’ is flawed, leading to a vast under-accounting of compensation.
This article is a continuation of ‘Analysis of Payment Delays and Delay Compensation in NREGA: Findings Across Ten States for Financial Year 2016-17‘. In the current article, we present some findings of our analysis based on 4.5 million transactions in about 3,600 panchayats across ten states for the first two quarters of the current financial year. We randomly sampled ten panchayats per district per state.
Repercussions of delays in wage payments
The Department of Expenditure (Ministry of Finance) took cognisance of our research in August 2017 and issued an office memorandum acknowledging that the delays are calculated only until the funds transfer order (FTO) is generated at the block/panchayat level. The document indicated that the principal reasons for such delays were “infrastructural bottlenecks, (lack of) availability of funds and lack of administrative compliance”.
Ironically, the very next month the central government blocked funds for 19 states since many of them had not submitted audited reports to the Centre. The issue persisted and wages were delayed for several weeks before the payments finally began to trickle in. In this tussle between the Centre and states, it is the workers who continue to suffer. Notwithstanding the delay in payments, the government’s misrepresentation of the ‘delay’, means that the workers cannot even be compensated for the full extent of delays.
In FY 16-17, we found in our sample of over nine million transactions that merely 21% wages were paid in the stipulated 15-day period. Contrary to the government claims of 85% payments made on time in this financial year, the analysis of our sample indicates that only 32% wage payments have been made on time. This year some wage payments have been pending for over 200 days. In such a scenario, it is not only the worker (whose wage is delayed) who is impacted but also others in the village due to loss of faith in the programme.
Wage payment process
Step one: Under the national electronic fund management system (NeFMS), an FTO is generated at the block/panchayat level on completion of the work week.
Step two: Subsequently, the Centre approves the FTO digitally and the payment is processed electronically. After passing through a notional state government bank account the wage is directly transferred to the individual worker’s account.
Broadly, step one is the individual state’s responsibility and step two is the Centre’s responsibility. Currently, the second step is not being considered as ‘delay’ in the MGNREGA management information system (MIS) thus absolving the central government and the payment agencies of any delays in labour wage disbursal by them.
Broad statistics and overall payments summary
Figure 1 depicts three characteristics for each state in our sample: (a) percentage of transactions for which the payments were made within the stipulated 15-day period, (b) percentage of transactions for which no delays are being accounted, (c) percentage of transactions for which partial delays are being calculated.
As Figure 1 shows that only about 32% of all the transactions were made within the 15-day period, i.e., both step one and step two were completed in 15 days. No delays are being calculated for 45% of the transactions. This situation occurs when the states do their job on time but the Centre takes longer than 15 days to release funds to the state. Only partial delays are being captured for 23% of all the transactions analysed, i.e., step one exceeds 15 days.
Table 1 – State-wise unaccounted compensation
|States||Delay Compensation Calculated in the MIS||Delay Compensation Not Calculated in the MIS (in Rs)||Total Compensation Truly Due (in Rs)||% of True Delay Compensation Not Calculated||% of Unaccounted Compensation in FY 17
(Q1 & Q2)
The MIS calculates the delays till the date when the FTO is generated. We have calculated the delay until the date unto which the wage is credited in the respective worker’s account. The compensation amount truly due is thus the sum of the compensation calculated until FTO generation date and the compensation for the days until the time worker’s account is credited.
Table 1 shows the percentage of compensation that is unaccounted across the ten states. Figure 2 shows that in the first two quarters of this financial year, a whopping 86% of the delay compensation amount is not even calculated, let alone paid. This amount increased from 57% in the last financial year. Chhattisgarh, Kerala and West Bengal had over 90% of the delay compensation amounts going unaccounted this year. Barring Bihar and Madhya Pradesh, most states had close to 80% of delay compensation amounts not being captured.
No delays are being captured
This encapsulates all those transactions for which step one of the wage payment process was completed in 15 days but step two occurred beyond the 15 day post muster closure. In such cases no compensation is being calculated at all since the delay is accounted for only until step one.
Figure 3 gives a state-wise comparison. We can see that on an average, for all the states together, the average time taken for the Centre to transfer wages to the labourers when the states are completing their work on time is about 25 days. In particular, the time taken to release funds to West Bengal seems to be the longest, about 53 days, while the time taken to release funds to MP is the least – ten days. It is unclear why there is such variation across states.
Partial delays are being captured
The provision of the delay compensation clause has not deterred the government to reduce massive delay in payments. In the first two quarters alone of FY18, wage payments of more than 1.14 lakh transactions are still pending. Figure 4 shows the distribution of pending payments in buckets of 30 days for pending payments. On an average, across the ten states, wages are pending for 94 days after the FTO was generated these transactions. In our sample, it takes on an average 51 days for states to generate the FTO in the first place.
While the Centre is not held accountable for this delay, the states have to pay a meagre amount to compensate per day of delay. The lack of accountability leads to loss of faith in the workers who depend on the MGNREGA wages for their incomes, especially in the lean months when agricultural activity reduces. A state-wise comparison shows that after FTO generation, it takes on an average 51 days for payments to be credited in West Bengal but only one day in Madhya Pradesh. It is unclear why there is such variation across states. The true payable delay compensation for our sample is Rs 7.5 crore but according to the NREGA MIS it is 1.05 crore. Thus about 86% of truly payable delay compensation to workers is not even being accounted by the central government.
These are cases of failed transfers to the workers’ account. Payments get rejected primarily due to technical reasons such as incorrect account numbers in the system, mismatch of names in the account and the Aadhaar etc. For such payments, a fund transfer order has to be regenerated, which could take up to several days. In merely two quarters of this financial year, over 80 million rupees worth of wages payments were rejected.
In an attempt to improve the payments process, the government migrated to the NeFMS in April 2016. Six of the ten states sampled migrated to the NeFMS system in April and the remaining in October 2016. In principle, the NeFMS system is supposed to hasten the wage payments and reduce the number of days taken for wages to be credited in the workers’ accounts. This would be a welcome step if it would indeed achieve this feat. However, this year only 32% of payments have been credited within 15 days and we fear that the situation will worsen as the year goes by owing to severe stifling of funds. Prior to the NeFMS system the state governments would use a contingency/revolving fund to make the payments until the Centre sanctioned the funds. The current payments system is completely centralised and the state governments cannot pay the workers even if they intend to. The recommendations in the aforementioned memorandum show that it intends to pin all responsibility to the states and payment agencies thereby absolving the central government of all its responsibilities for wage payment delays. It is certainly not the rural labourer’s fault, who has completed her work, for not being paid on time because of “unavailability of funds” or “infrastructural bottlenecks”.
The payments infrastructure requires seamless coordination between the Centre, states, payment agencies and the administrative bodies. There should be clearly defined responsibilities for each one of them. Not only has the government violated the law but also the rights of the workers. Timely payment is not merely a question of political or bureaucratic efficiency but a question of life and death for those on the margins of subsistence.
An abridged version of this article first appeared in Business Standard on December 3, 2017.
Rajendran Narayanan teaches at Azim Premji University, Bangalore and Sakina Dhorajiwala and Rajesh Golani are independent researchers. The views expressed are personal.