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Mainstream, VOL LX No 7, New Delhi, February 5, 2022

A Strong Case for Significant Increase in NREGA Allocations in New Union Budget | Bharat Dogra

Friday 4 February 2022, by Bharat Dogra

[This article was submitted before the announcement of the 2022 budget by the Central Government but could not be carried here earlier, it remains extremely relevant]

At a time of continuing high levels of economic distress and hardship in rural areas, there is a very strong case for a big increase in budgetary allocations for those schemes which can directly help to reduce this distress. In this context an activist and monitoring group which has the support of senior experts and academics, the Peoples’ Action for Employment Guarantee (PAEG), whose statements have proved to be very useful in the past, has recommended more specifically for substantial increase in allocations for rural employment guaranee scheme for the next financial year.

In a statement released on January 25, 2022, PAEG has argued that the Mahatma Gandhi National Rural Employment Guarantee Act (NREGA) has acted as a crucial shock absorber for the rural poor in recent exceptionally difficult times. For instance, persondays generated increased by 46% in Financial Year (FY) 2020-21, compared to the previous FY. The persondays generated this FY till December 2021 have already exceeded FY 2019-20’s total persondays by 10%. In fact, the true demand is even higher than the nationally reported demand.

PAEG has explained on the basis of its careful and continuing monitoring of official data that FY 2020-21 ended up with unpaid dues of over Rs 17,000 crores despite an allocation of Rs 40,000 cr in addition to the original allocation of Rs 61,500 crores. Consequently, PAEG and NREGA Sangharsh Morcha recommended a budget allocation of at least Rs. 1.5 lakh crores for FY 21-22 to honour the demand driven nature of the Act. However, despite persistent need for work, the government allocated only Rs. 73,000 crores, 26% of which corresponded to previous years’ dues. Within the first half of FY 2021-22, NREGA coffers had become empty [1]. PAEG’s half-yearly tracker [2] showed that many states had a negative balance. This prompted the government to allocate an additional Rs. 25,000 cr. in December 2021. However, official data [3] as of January 24, 2022, shows that only Rs 7,114 cr of those Rs.25,000 cr has been released. So far, less than 5% of households employed have completed 100 days of work in the current FY.

On average, over the past 5 years, 20% of the budget has gone into clearing the arrears of previous years (Figure 1). The unpaid dues this year are already at Rs. 12,494 crores. Assuming the expenditure trend so far in this FY continues, PAEG has extimated that over Rs. 21,000 crores would be pending at the end of FY 2021-22.

Figure 1: Figure 1: % of initial budget spent in clearing past dues (Source: MIS Report 7.1.2)

PAEG has served a timely reminder reminder, quoting the MGNREG Act , Chapter III, Paragraph 6, Section 2, that wages must be at least as much as the minimum agricultural wage for each state. In its estimation, PAEG has taken the minimum agricultural wages announced by the various state governments as given in Aggarwal & Paikra (2020) [4] and adjust them by 5% for inflation in every successive FY. Using the number of active job cards in each state as weights, PAEG has estimated that the national average minimum wage rate is Rs. 269.

Taking Rs. 269 as the wage rate, PAEG has estimated that the minimum budget for FY 2022-23 must be Rs. 2.64 lakh crores, to provide legally guaranteed 100 days of work per household for at least those that worked in the current FY.

Table 1: Minimum Budget Required for NREGA in FY 2022-23

Wage rate Rs. 269 A
Wage bill per HH @100 days Rs. 26,900 B = A * 100
Number of HHs 6.68 crores C [number of HHs that have worked in FY 2021-22]
Total wage bill Rs. 1,79,692 crores D = B * C
Wage bill + material costs Rs. 2,50,407 crores E = D * (100/71.76) [material costs have been assumed to be 28.24% of (wage bill + material costs)]
Total material costs Rs. 70,715 crores F = E – D
Centre’s share of material costs Rs. 53,036 crores G = F * 0.75 [Centre is responsible for 75% of material costs]
Wage bill + material costs + admin costs Rs. 2,60,217 crores H = E * (100/96.23) [admin costs have been assumed to be 3.77% of the total costs]
Admin costs Rs. 9,810 crores I = H - E [Centre is responsible for 100% of admin cost]
Estimated pending payments by the end of FY 2021-22 Rs. 21,361 crores J [as estimated here]
Required budget Rs. 2,63,899 crores K = D + G + I + J

In Table 2, PAEG has presented scenarios of how much allocation would approximately correspond to how many days of work per household can be generated. The methodology is identical to that used in Table 1 except the number of days considered. For example, if the allocation is Rs 2.15 lakh cr (row 2 in Table 2), then, on average, 80 days of work can be generated for all the working households.

Table 2: Number of possible days of work per household that can be generated based on different budget allocation scenarios

S/L Budgetary allocation Average days of work/household (hh) employed Methodology
1 Rs 2.64 lakh cr 100 days of work per working hh
2 Rs. 2.15 lakh cr 80 days of work per working hh (80/100) * Rs. 2,42,538 crores + Rs. 21,361 crores
3 Rs. 1.67 lakh cr 60 days of work per working hh (60/100) * Rs. 2,42,538 crores + Rs. 21,361 crores
4 Rs. 1.18 lakh cr 40 days of work per working hh (40/100) * Rs. 2,42,538 crores + Rs. 21,361 crores

Note: Rs. 2,42,538 crores = Rs. 2,63,899 crores - Rs. 21,361 crores|

Drawing attention to delays in wage payments which have persisted in NREGA for many years now PAEG has stated that these are a consequence of inadequate funds allocation as acknowledged by the Ministry of Finance itself. The Act stipulates that wages must be credited to the workers’ accounts within 15 days of completion of work but the Union government continues to violate the Act and the Supreme Court orders by not paying wages on time and not paying the corresponding delay compensation as mandated by the Act. Even using the flawed definition of delay, the delay compensation is rarely paid. According to PAEG, only 1.69% of payable compensation has been paid this year. This FY, PAEG hmonitoring has shown, the Centre took longer than the stipulated 7-day period to process 50.2% of wages - although we don’t know the extent of the delay. Currently, 13% of transactions are pending, amounting to more than Rs. 7,047 crores. PAEG has reminded the government and the nation that not paying wages on time is akin to forced labour and violates several fundamental rights of crores of workers.

It is clear from this note that PAEG has monitored NREGA pwrformance very carefully and its recommendations are based on a very careful evaluation as well as intense concern for the most vulnerable sections of our rural people. Therefore the government should give very careful attention to the timely and important recommendarions made by PAEG.

(The writer is Honorary Convener, Campaign to Save Earth Now. His recent books include Man Over Machine and Protecting Earth for Children. )

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