A Drought of Funds for the Employment Guarantee

A guarantee for employment presupposes that the money to be paid for the work provided is also guaranteed.

Credit: PTI

Besides guaranteeing work, the MGNREGA scheme must also guarantee wages. Credit: PTI

There is indeed much in today’s India that worries me. I, however, believe that there is one achievement that stands out and of which we can feel singularly proud and that is the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA). It is a remarkable intervention, a landmark, the first in the history of development that guarantees work to anyone who asks for it. It is rightly hailed the world over as one of the finest programmes for the rural poor.

Although it was the first UPA government that introduced the programme in 2006, the present NDA government has been quick to own it, despite some initial hiccups. I find it surprising, and also quite intriguing, therefore, that the government, through the Ministry of Rural Development, has not released funds to the states for MGNREGA in the time frame and amounts as required under the scheme and law.

A guarantee for employment presupposes that the money to be paid for the work provided is also guaranteed, not in the budget papers alone but as funds available to the gram panchayat where the muster rolls (which record the daily attendance) are maintained. In recent years, both the budgets and the releases have been extremely inadequate for the scheme to function as it should.

Adequate and timely fund releases are a prerequisite for the implementation of the programme, a prerequisite so elementary that it does not require to be stated. As a former financial advisor in the Ministry of Rural Development and a former director general of the National Institute of Rural Development (which has on occasion been a think tank for the ministry), I am dismayed, aghast in fact, that there is no money for the employment guarantee because the government of India has not released funds!

Newspapers and news channels report that the Supreme Court has also expressed displeasure and that it was only after adverse comments from the court that 12,230 crore rupees were released to the states on April 9, 2016. Somehow these reports do not mention that this entire release will go in paying the pending bills. This means, in effect, the states will continue to have no money to take up any work this year. Even the mandarins in the Ministry of Finance are aware that the months from April to June are critical, especially for the landless labour work-force, for this is the time when the demand for work peaks in the villages.

It is an affront to the very notion of an employment guarantee, that the coffers should be empty in April in a drought year, and there should be no funds available to meet the cost of wages under MGNREGA. Worse, this is contempt of the parliament that has guaranteed the employment through a statute.

It might be relevant here to recall some of the basic principles that govern the flow of funds from the government to the states. Based on the budget allocation the programme funds are released to the states for every scheme, generally in two instalments. The Ministry of Finance and the financial advisor in the functional ministry have a responsibility for the correct and proper utilisation of funds. Responsibility is also cast on them to ensure that the objectives of the schemes are achieved and that such financial procedures are put in place which enhance the quality of implementation.

It was with this objective in mind that the Ministry of Rural Development introduced systems almost two decades ago for the timely and efficient release of funds for its central and centrally sponsored schemes. The releases were made in two instalments, the first in the first week of April and the second in the third quarter (September to December) or thereafter, after the receipt of the certificates of utilisation and reports of progress prescribed for the programme. The release in April was substantial, at 50% of the allocation, and was unconditional. This arrangement was felt necessary to ensure that there was no shortage of funds for the implementation of schemes especially for wage employment, which require a continuous and uninterrupted flow. The second instalment was released only after a thorough examination of the accounts, the reconciliation of figures, and compliance with any specific conditions that may have been prescribed. This process sometimes took time but every effort was made to ensure that at no stage did a state fall short of resources to implement the schemes. The states in turn submitted whatever documents and information that were required.

It is incomprehensible for me, therefore, to find that almost all states (barring Tamil Nadu and Tripura, amongst the major ones) have ‘negative balances ‘ – the euphemism used in financial jargon for no money to pay for expenditure already incurred and for bills pending payment. These bills amount almost exactly to the release now made, a whopping 12,000 crore rupees.

It is apparent that the procedure for the timely release of funds that had been evolved with much care and effort in earlier days is no longer prevalent.

The Ministry of Rural Development had further developed a system for the electronic transfer of funds directly to the district, bypassing the states where the money was invariably held up to bolster the states’ own finances. I am happy and proud, to find that the system of electronic funds transfer has been refined to remarkable levels in recent years, for MGNREGA in particular. There is now an arrangement (eFMS) for specified amounts (the wages due) to be credited directly to the bank and post office accounts of individual workers. This is truly amazing, when you reflect that there are 8.9 crore workers under MGNREGA; in fact you begin to wonder whether all this is actually real! Not only that, this happens online. To the best of my belief there is no system in the world today that can be compared with this.

If therefore there is a shortage of funds, the only explanation can be that the releases are being withheld. I cannot conjecture why the money should be withheld, particularly when it is required to pay for employment guaranteed by the parliament. I am certain, however, that this is the surest method of killing the programme. Does this government wish to plead guilty of complicity in this homicide?

Lalit Mathur is a retired IAS officer and has worked as Financial Advisor in the Ministry of Rural Development.