The long road to timely MGNREGA payments

There remain delays in the stage where the Central government transfers wages to the workers’ accounts

Updated - November 08, 2021 12:52 am IST

Published - November 08, 2021 12:15 am IST

A labourer registers herself for MGNREGA work in Mubarakpur village in Chandauli district, Uttar Pradesh.

A labourer registers herself for MGNREGA work in Mubarakpur village in Chandauli district, Uttar Pradesh.

There is a famous parable of the 13th century mystic Mullah Nasruddin. He was once spotted under a street light searching frantically for a key that he had lost. A passer-by noticed the frazzled Nasruddin and stopped to help him. After both of them spent a long time searching for the key, the exasperated passer-by asked Nasruddin if he was sure that he had dropped his key there. Pointing to his house far away, Nasruddin said that he had, in fact, lost the key near his house. Agitated, the passer-by shouted at Nasruddin: “If you lost the key near your house, why are you wasting time searching for your key here?” To which Nasruddin, with no sense of irony, responded, “There is no light near my house but there is light here, so I am searching for the lost key here.”

Delays in payments

This parable captures the essence of wage payment delays under the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA). Eight crore MGNREGA wage transactions were pending on Diwali. The People’s Action for Employment Guarantee (PAEG) recently released a tracker with important metrics on MGNREGA implementation. It showed that funds allocation this financial year (FY) is 34% lower than the revised budget allocation of last year. And this year’s funds have been exhausted. The Ministry of Rural Development issued a press release in response to these stating, “Currently Rs.8921 crore funds are available which can meet the wage liability...” This statement is misleading as the Ministry has not accounted for pending arrears of ₹17,543 crore from previous years. In a welcome move since the media reports, the Chief Ministers of Odisha and Tamil Nadu wrote to the Prime Minister seeking additional funds for MGNREGA.

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There is ample evidence by now, including an admission by the Ministry of Finance, that delays in wage payments are a consequence of insufficient funds. There are two stages in the wage payment process. In Stage 1, States must electronically send invoices, also called FTOs, to the Central government within eight days of completion of work at a worksite. These invoices contain essential worker details like their names and bank account numbers. The Central government then processes the invoices and transfers wages directly to the workers’ accounts. This is called Stage 2 and is the Central government’s responsibility that must be completed within seven days after Stage 1. Since Supreme Court orders in 2018, Stage 1 delays have reduced while Stage 2 delays continue. As per the Act, if Stage 1 plus Stage 2 exceeds 15 days, then workers are entitled to a delay compensation for each day’s delay. However, in violation of the Act and the Supreme Court’s orders, no delay compensation for Stage 2 is even being calculated. Instead of ensuring sufficient funds for timely payments, the Central government has repeatedly tinkered with the payment architecture as if payment delays are an artefact of technological hurdles. The Nasruddin parable appeared in a new avatar this year. Earlier, the invoices were not segregated by caste. On March 2, the Central government issued a circular to segregate invoices based on the caste of workers (Scheduled Castes, Scheduled Tribes, and ‘Others’).

In order to investigate Stage 2 delays and the impact of caste-based invoices, as part of LibTech India, we released a report called ‘Heavy Wait’. We analysed 18 lakh invoices across 10 States from April to September. In our sample, Stage 2 was completed only for 29% of the invoices within the mandated seven-day period. In fact, for nearly two-thirds of the transactions in Jharkhand and more than half the transactions in Chhattisgarh, Madhya Pradesh and West Bengal, Stage 2 exceeded 15 days. There was also a steady increase in Stage 2 delays from July to September indicating depletion of funds. If the Central government’s recent claims of allocations being adequate are true, then what is the explanation for such massive delays in wage payments?

Caste-based segregation

There were significant variations in delays by caste. While 46% of payments to SC workers and 37% for ST workers were completed in the mandated seven-day period, it was a dismal 26% for non-SC/ST workers. The negative impact of caste-based segregation was felt acutely in poorer States such as Madhya Pradesh, Jharkhand, Odisha and West Bengal. For instance, Stage 2 was completed in seven days for only half the transactions for SC/ST workers in Madhya Pradesh. This was much worse for non-SC/ST workers in Madhya Pradesh for whom only 7% of transactions were completed in that period. In addition to such stark differences, in West Bengal, the Central government kept pending nearly 45% of the wages beyond 15 days as on October 13.

As this newspaper reported earlier, caste-based segregation has also resulted in tensions at worksites . It had also resulted in a threefold increase of workload for computer operators at blocks. Our Right to Information request to access the circular met with a hazy response. When questioned by the media earlier about this move, the Central government said that “For better accounting purposes, it has been decided, in consultation with the Department of Expenditure, to have a category-wise (SC, ST and others) wage payment system.” No doubt, knowing the earnings of SC/ST households is useful. But it could have been done after the wages were paid. Toying with the Act using the veil of better accounting is illegal. After critical media reportage, the Central government, in a welcome move, has revoked the caste-based segregation of wage payments. However, the Central government has not assumed any accountability by paying compensation for delays despite the evident damage caused by caste-based segregation of payments.

Additionally, in our large sample analysis, we found no difference in the time taken for payments through the Aadhaar Payment Bridge Systems (APBS) and traditional account-based payments. In fact, APBS has given rise to a litany of complicated problems like misdirected payments and payment failures due to erroneous Aadhaar mapping with the payment software. Misdirected payments happen when one person’s Aadhaar gets linked to somebody else’s bank account. These problems are difficult to resolve even for bank and block officials resulting in increased hardships for workers. These minimally warrant an impartial, independent assessment and audit of the payment systems.


Lost keys cannot be found where they were not lost in the first place. In the same vein, technical fixes cannot be substitutes for political will. Official data show that the work demand this year is similar to that of last year. As such, at least ₹50,000 crore needs to be allocated urgently and the Central government, in compliance with Supreme Court orders, must automatically calculate and pay the workers their entitled delay compensation.

Anuradha De is a researcher with LibTech India; Rajendran Narayanan teaches in Azim Premji University, Bengaluru, and is associated with LibTech India and PAEG

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