No money left in MGNREGA coffers; 21 States in the red

States creating artificial demand, says official; workers pushed into ‘forced labour’ by delayed payments, say activists

October 29, 2021 10:37 pm | Updated October 30, 2021 08:33 am IST - New Delhi

Labourers engaged under the Mahatma Gandhi National Rural Employment Guarantee Act arrive to work on a pond at Saidapur Devkali village in Uttar Pradesh’s Lakhimpuri Kheri district on September 28, 2021.

Labourers engaged under the Mahatma Gandhi National Rural Employment Guarantee Act arrive to work on a pond at Saidapur Devkali village in Uttar Pradesh’s Lakhimpuri Kheri district on September 28, 2021.

The Centre’s flagship rural employment scheme has run out of funds halfway through the financial year, and supplementary budgetary allocations will not come to the rescue for at least another month when the next Parliamentary session begins. According to its own financial statement, the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) scheme shows a negative net balance of ₹8,686 crore.


This means that payments for MGNREGA workers as well as material costs will be delayed, unless States dip into their own funds. Activists say the Centre is condemning workers to “forced labour” by delaying wage payments at a time of economic distress. However, the Centre is now accusing many States of “artificially creating demand” for work on the ground.


The MGNREGA is a demand driven scheme, guaranteeing 100 days of unskilled work to any rural household that wants it. During last year’s COVID-19 lockdown, the scheme was ultimately given its highest budget of ₹1.11 lakh crore and provided a critical lifeline for a record 11 crore workers.

However, the scheme’s 2021-22 budget was set at just ₹73,000 crore, with the Centre arguing that the nationwide lockdown was over and that supplementary budgetary allocations would be available if money ran out. As on October 29, the total expenditure including payments due had already reached ₹79,810 crore, pushing the scheme into the red. Already, 21 States show a negative net balance, with Andhra Pradesh, Tamil Nadu and West Bengal faring the worst.

“We are facing a situation of MGNREGA closing down halfway through the year. Who is going to absorb the cost? The poorest and most vulnerable communities who have already been crushed by the pandemic’s impact,” said Nikhil Dey, a founder of the Mazdoor Kisan Shakti Sangathan. He cited a 2016 judgement of the Supreme Court, which described pending wage payments under MGNREGA as “a clear constitutional breach committed by the State” and “a modern form of begar ”.


“The Government of India is, on the face of it, pushing crores of people into forced labour, as held by the SC,” added Mr. Dey.

“It is somewhat early this year [to run out of funds],” admitted a senior official of the Rural Development Ministry, who did not wish to be named. “People will continue to get work. Only thing that might happen is that the payment will only be made once funds are available. But many States can provide temporary funds out of their own kitty and then once the fund is available, it can be reimbursed [by the Centre].”

The official blamed State governments for the current situation. “My apprehension is that the States are using it not as a demand driven scheme, but as a supply led scheme. The States are asking their field authorities to artificially create demand,” said the official. “The nature of the scheme is that once people turn up and demand jobs, then the demand is provided. It’s not that someone in the administrative hierarchy organises work and then asks people to join. That is what is happening in many States,” added the official.

Also read |  MNREGA is a living monument of your failures, Modi tells Congress

Activists say the exact opposite is happening on the ground. MGNREGA data shows that 13% of households who demanded work under the scheme were not provided work. “Even these figures are underestimates, as only demand that is registered in the system is included. Many workers are simply turned away by officials when they demand work, without their demand being registered at all,” said Vijay Ram, a researcher with People’s Action for Employment Guarantee.

“When there is no money, State governments tend to stop generating work. In fact, there is an artificial squeezing of demand,” said Mr. Dey.

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