Scheme against jobs

Government is bent upon shrinking jobs for the poor by fundamentally changing the rural employment guarantee scheme against the advice of its officials

By Jitendra
Published: Sunday 30 November 2014

Scheme against jobs


After close to a decade of eminence as the world’s largest public wage programme, the national scheme that gives jobs to the poor in rural areas looks all set for imminent disbanding. Communications between officials of the Union rural development ministry and the minister in charge, Nitin Gadkari, show that the minister is pushing a dictate from the Prime Minister’s Office to bring changes in the programme. This has brought Gadkari in confrontation with his own officials who are vehemently opposing the changes.

Officials say the changes go against the spirit of the programme under the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA), which was designed for giving jobs to unskilled workers. Going by the changes suggested and pursued by Gadkari, the programme would look like one of those earlier public wage programmes, such as the Employment Assurance Scheme, that did not have the element of entitlement to job. It seems the programme is now opened for the backdoor entry of contractors. In another blow to it instead of village panchayats, district officials and state bureaucrats would now play a pivotal role.

At present, MGNREGA guarantees 100 days of unskilled employment on demand from a rural family. By far it remains the most participated public wage programme in India. The government has spent close to Rs 2.6 lakh crore on this and created close to 14 million productive assets like ponds and roads (see ‘Largest public wage scheme’).


Down To Earth has access to official communications on the changes suggested and forcefully being pushed into the programme. Its road map to oblivion has been laid out in a systematic way. First, the government allocated the lowest ever budgetary support in the last budget. Secondly, it is changing the wage-material ratio in such a way that more will be spent on material and less on wage, thus, bringing down the number of people who can be employed. The government has suggested changing the current 60:40 ratio to 51:49 ostensibly to create durable assets. This will shift the focus from unskilled jobs to skilled jobs as high-cost assets will need skilled workers.

Thirdly, to further downsize the scheme, the government is narrowing down its focus to just 200 poorest districts. The Central government is even suggesting power to states to decide the works to be undertaken. This takes away the core objective of the programme: to let people select relevant productive works for local development.

First blow: change in ratio

It all started on July 30 this year when Gadkari made a statement in the Lok Sabha suggesting the changes. A few days before this on July 21, the rural development ministry had issued a notification changing the wage-material ratio, which will now be decided at the district level, instead of the village panchayat level. This triggered the panic button as it would drastically reduce the programme’s employment potential, particularly in a year when 30 per cent of the country has a drought-like situation. During droughts job demand usually goes up.

A large number of people got employment while reviving a river under MGNREGA in Fatehpur district of Uttar Pradesh

From here starts a long trail of communications starting from joint secretary R Subrahmanyam who went outright against the change. “The proposal to change this ratio to 51:49 and make it applicable at the district level, though is legally and technically possible, runs contrary to the spirit of the Act which has been made for creating employment opportunities for the unskilled workers who face considerable vulnerabilities during the lean agriculture season,” wrote Subrahmanyam in a communication to rural development secretary L C Goyal in August. The secretary in his report to Gadkari in the same month also supported this observation. Gadkari overruled, saying, “As to whether it runs contrary to the spirit of the Act, the demand made by large number of MPs for such a change is reflective of the view of the legislature…should be brought about immediately through an amendment in Schedule-I of the Act.”

The communication uncovered another secret: it is only Madhya Pradesh, a state ruled by the BJP, which has demanded such a change. The ministry has been claiming many states have demanded the change.

Gadkari’s main argument for increasing the spending on material is that this will create durable assets. A popular perception is that the programme compromises the quality of assets by giving precedence to wage. Even the 42nd parliamentary standing committee report on the implementation of MGNREGA indicated poor quality of assets created. Experts say this is a mere perception and there is no study to support it. “A few cases of corruption led to poor quality of assets but it cannot be generalised. Gadkari should present some facts,” says Nikhil Dey of the Majdoor Kisan Shakti Sangthan, a non-profit in Rajasthan.

A mistaken notion that earthen structure is temporary and cement structure perma- nent is the guiding principle of the minister. Millions of traditional water harvesting structures, such as johars in Rajasthan and pokhars in central India are made of earth and more durable than the cement structures.

Recently, a group of 28 development economists wrote to the prime minister against the change in ratio “without any evidence that this would raise the productivity of NREGA works”. “For the first time, the Central Government is imposing caps on NREGA expenditure on state governments, undermining the principle of work on demand,” they argued.

The objections are not without reasons. In the last financial year, the material component was 27 per cent as against the prescribed 40 per cent. In the previous two years it was 28 per cent and 30 per cent (see ‘More wages please’). imageAs per a written submission by Subrahmanyam, only three states crossed the prescribed limit. Ashish Ranjan of Jan Jagaran Shakti Sanghathan, a Bihar-based trade union working on the implementation of MGNREGA, says changing the current ratio, without realising its full potential, is not a good idea.

Its impact is estimated to be enormous. The rural development ministry predicts that with the new ratio the employment will come down by 40 per cent compared to 2013-14. “The situation could get more complicated in a drought year. Five crore [50 million] households will be adversely affected by this decision,” warns the official note rejected outright by Gadkari. Down To Earth repeatedly contacted Gadkari’s office for comments but could not get access to him.

The proposed change brings back the threat of contractors who monopolised earlier public wage programmes. For material-intensive work, skilled labourers are preferred and gradually contractors enter in the guise of supplying material, machines and finally labour. This is one of the prime reasons MGNREGA prohibited use of machines which replace a large number of labourers. Under MGNREGA many labourers were liberated from the clutches of the contractor system and the wages are paid directly by governments.

The fate of the Employment Assurance Scheme of the 1990s is instructive. The demand-driven scheme was restructured by the then BJP-led coalition government in 1999 in such a way that it became supply-driven. Contractors manoeuvred it and the scheme died soon. A study of the Planning Commission shows nearly 80 per cent of the labourers got jobs on the recommendation of contractors and influential people in the panchayat. “In the past, whenever material-intensive work was involved, it brought many benami (proxy) contractors which resulted in corruption and its ultimate deterioration,” says a senior rural development official who does not want to be identified.

Palomi Mistry, general secretary of the MGNREGA Workers Union in Gujarat, suggests that the government can subsidise construction material rather than dilute the wage-material ratio.

Second blow: states' designs

The other structural change that would be a setback for the Act is allowing states to decide works to be undertaken. At present, only the Central government has the power to alter the schedule of work. As per the change, a state can request for a new work and the rural development ministry will have to decide within 15 days.

“If this change is allowed, along with others suggested, it would be a mockery of the letter and spirit of MGNREGA,” says Mihir Shah, former member of the Planning Commission who headed a committee on the implementation of the programme in 2012. “I agreed with an idea that states should be encouraged to propose additional work but based on the principle and spirit of the Act. The Centre had realised it earlier that states could tweak the programme, compromising basic features of the Act, so we had not allowed it,” Shah says.

Subrahmaniam’s note to the secretary also shows how state governments diverted the programme’s funds, violating its spirit. In Andhra Pradesh, funds were diverted to meet the agricultural expenses of land owners. “The chief minister of Andhra Pradesh announced it would provide Rs 2,000 to Rs 3,000 per acre (0.4 hectare) to all land owners from MGNREGA funds,” states the officer. Kerala also wants to use the scheme’s funds for feeding cattle.

Many states time to time demanded inclusion of “agriculture operation” under the scheme. “If agriculture operation would be permitted even to the small and marginal cultivators, the outflow for the 10 crore [100 million] hectares of cultivated land could demand an allocation of Rs 1 lakh crores only for this work,” states Subrahmanyam in his note. Economist Abhijit Sen agrees if states are allowed to take up any task of their choice it would lead the scheme to lose its sheen. “Money is not unlimited. If conditions are not put on states for utilising funds then there is no need of using the word ‘guarantee’ in the Act,” Sen says. This in many ways will dilute the supremacy of village panchayats that have the power to decide works to be undertaken. If the state is allowed to add works, bureaucrats and political leadership will try to impose their own decisions on the villages.

Third blow: limited coverage

Universal coverage of the scheme is no more the government’s priority. Currently, the scheme is meant for the whole country but new change will confine the scheme to 200 poorest districts. The Planning Commission has prepared a list of 2,500 backward blocks where this scheme will be targeted.

The target approach explains this year’s budgetary allocation. It is the lowest since the inception of the Act. The less the coverage the lesser the budget need. Shah, who had conceptualised the target approach, says it does not mean stopping the programme. “My approach was to meet full demand where demand is higher. And my observation is that the demand is higher in backward and poor districts,” he adds.

The ground is being prepared for limiting the scheme. The number of panchayats with nil spending has doubled this year (see ‘Curious case...’).

Curious case of vanishing demand
In the current year till October, the number of gram panchayats which did not spend funds almost doubled. In the previous three years the number of such panchayats was about 26,000. This year the number rose to over 47,000. A senior officer of the rural development ministry says the funds stopped pouring to the panchayats where demand was low. He apprehends the number may go up. "In the face of lower budgetary allocation and confinement of scheme to limited blocks, the number of such panchayats can only increase," he says.

The total budgetary allocation this year was nearly Rs 34,000 crore. After meeting last year’s liability of unpaid wages, the fund available for spending reduced to about Rs 29,000 crore. This is Rs 5,000 crore less than previous years’ expenditure. After changing the wage-material ratio, the wage part shrinks to a little more than Rs 14,500 crore. The amount is limited to meet the demands of limited coverage. “Most of this year’s allocation was spent on meeting the liabilities of the last year. Now less funds would be spent on selected blocks,” says Dibyendu Sarkar, MGNREGA commissioner of West Bengal, which had a huge liability of unpaid wages.

The rural development ministry’s assess- ment shows a decline of about 840 million person days of work across the country. The demand in the current financial year is likely to be 2,270 million person days, or more because of less rain (see ‘Jobs to shrink’).

imageGadkari kept aside the issue of shortage of fund by saying that the government of India is legally bound to provide additional funds if such demand arises. Shrinking of funds this year tells a different story.

Back to square one?

Officials informally indicate that despite the opposition changes are going to take place. But more importantly, it is turning out to be a debate over the very basis of the programme: creating productive assets while guaranteeing unskilled jobs. MGNREGA’s success can be gauged from the fact that no earlier public wage programme attracted so much participation and created so many assets.

It is the first programme that allowed local panchayats and villagers to identify their own works and beneficiaries. It strengthens grassroots democracy. The new government seems more interested in running the scheme that is owned by it. “The hastiness of Gadkari is not appropriate. It needs wider consultation with people and experts,” says Subrat Das of Delhi-based Center for Budget and Governance Analysis. “In the end any baseless tweaking would impact only marginalised people.”

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