MGNREGS is set for an overhaul; Plan to plug leaks and make state governments stakeholders – Business News

The Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS) is set for a revamp under the new government to make state governments active participants, sources said. Sources said plugging leaks and ensuring deserving states get their due share is also on the agenda.

Currently, richer states receive a disproportionate share of the system, while financially strapped and backward states are slow to reap the full benefits.

Although it is a centrally sponsored scheme where state governments usually share 40% of the cost, in the case of MGNREGS, the central government bears the full cost.

The Centre's expenditure under the scheme stood at Rs 89,008 crore in FY24 as compared to Rs 88,290 crore in the previous fiscal. Spending touched a record ₹1,09,810 crore in Covid-hit FY21.

While details of restructuring the system will be finalized once a new government takes charge in June, officials said the main issue is the quality of wealth creation, where responsibility for ownership does not lie with state governments. “If not 40%, state governments should cover about 20% of the cost. This would make them a stakeholder in the system and they would take responsibility and ownership of the assets created,” officials said.

Another issue the Center wants to investigate is that several state governments are abusing the system to supplement their rural works budgets instead of addressing seasonal unemployment. States with higher per capita income are the biggest beneficiaries of the system. The five southern states – Tamil Nadu, Andhra Pradesh, Karnataka, Kerala and Telangana – accounted for over 35% of the program's expenditure in FY24.

Some southern states were found to be using the MGNREGS funds to build infrastructure projects while conserving their own resources. Some of these states use the funds, for example, to partially expand rural roads. If schools are constructed by them, the toilets will also be constructed using MGNREGS funds. “States are using the Centre’s money for building their own projects defeats the purpose of the program, which is to address unemployment during the dry spell,” officials said.

Such malpractice puts pressure on states that need funds to provide employment to people in the off-season as the corpus gets depleted quicker. According to an internal government estimate, a third of MGNREGS funds suffer from various types of leakages.

In many states, including Tamil Nadu, labor costs are around Rs 1,000 per day and yet it is difficult to find workers.

Officials said a new trend has emerged in many states where labor is expensive – that of getting MGNREGS work done by machines and paying a portion of the MGNREGS money to workers who provide their identities for use in the program provide.

“Such practices make the system appear as if its purpose is only to distribute budgetary allocations rather than making the system demand-driven work for the unemployed,” officials said.

The Center would have to take some corrective measures to curb such misuse by the wealthier states compared to low-income states like Bihar, officials added.

The aim of MGNREGS is to provide at least 100 days of employment with guaranteed wages in a financial year to every household in rural areas of the country, whose adult members engage in voluntary unskilled manual labor, mainly during off-season.