MNREGA funds allocation: Honouring the work-on-demand guarantee

The Centre has sought an additional Rs. 25,000 crore as funding for MNREGA (Mahatma Gandhi National Rural Employment Guarantee Act). Based on simple calculations using official data, Ashwini Kulkarni contends that the actual fund requirement is in fact much higher. As the pandemic continues to adversely impact rural livelihoods, the government should allocate sufficient funds to MNREGA, in order to honour the work-on-demand guarantee.

For over a month, national and local media have been covering the issue of a fund shortage in MNREGA (Mahatma Gandhi National Rural Employment Guarantee Act)¹. There are a host of pending payments pertaining to MNREGA work as the states do not have adequate funds for this purpose. To deal with the fund shortage, the central government allocated an additional Rs. 10,000 crore to the budgeted amount for MNREGA. Recent reports have also indicated that an additional Rs. 25,000 crore is being sought by the Centre as part of the supplementary budget.

In this post, I contend that the amount of additional funds demanded are ad hoc, and simple arithmetic based on official numbers from the MNREGA website shows that the minimum additional funds required in FY2021-22 is in fact far greater.

MNREGA expenditures: Estimating fund requirement

The total MNREGA expenditure² as on 3 December 2021 is Rs. 78,057.78 crore and the Centre has released Rs. 69,799.35 crore till date. Hence, the expenditure so far, has already surpassed the allocations made in the 2021-22 Union Budget.

Considering the expenditure so far, what could the requirements be for the remaining financial year? I provide some estimates below. I look at the potential funds needed based on three indicators, number of households who are likely to seek MNREGA work in the coming months, average number of person-days per household, and the possibility of higher person-days being demanded in the last four months of FY2021-22.

The average person-days generated per household, that has participated in MNREGA work in the last four years (FY2017-18 to FY2020-21), has been in the range of 46 to 52 person-days per year, and across the four years, the average person-days per household is 48 days per year. In FY2021-22, Rs. 6.25 crore households have clocked an average of 40 days of MNREGA work, each. If these same households were to reach the calculated annual average of 48 days, an additional Rs. 10,450 crore would be required in wage payments itself, with an average of Rs. 209 paid in wages per day per person³.

However, the number of households participating in MNREGA work would likely increase in coming months. In the last four years, the highest number of participating households in a single year was 7.55 crore. Considering the difference between this maximum and the households that have participated in MNREGA so far in FY2021-22 (1.3 crore households), and the estimates above, the additional amount required in wage payments would be Rs. 13,041 crore.

There are currently four months to go before the end of the financial year. In previous years, 40% of the total person-days in a year have been generated during these four months due to it being a lean period for farm work. In the current fiscal, a total of 246.88 crore person-days have already been accounted for (till the end of November), and if 40% of the total work in the year (based on trends from previous years) were to get added to this number in the coming months then an additional Rs. 34,398 crore would be required as funds for wage payments.

The above calculations are based on a simple extrapolation exercise using data from previous years, and the amounts accounted for are only about wage payments to unskilled workers – other costs, including the promised guarantee of 100 days of work, material costs, etc., are not being considered here. These simple calculations clearly depict the urgent need for augmenting fund allocations.

Pandemic impact

In FY2020-21, MNREGA outlay, which was Rs. 60,000 crore before the lockdown, increased to Rs. 100,000 crore, but allocated funds still remained inadequate. The total expenditure last year was Rs. 111,443.87 crore.

Further, the fund requirements in this financial year are likely to be much higher than past averages since these are extraordinary times. The Covid-19 pandemic and associated economic slowdown has cast a long shadow, and is continuing to have an adverse impact on livelihoods. On account of the pandemic, construction work, which absorbs most casual migrant workers in urban areas, has slowed down. Public works like roads and other infrastructure projects have not picked up in the period after the lockdown, and factories have also not returned to their earlier capacities. This has led to fewer earning opportunities in urban areas, and consequently several migrant workers have returned to their villages and sought some form of employment, thereby increasing the demand for MNREGA work.

Pew Research Center, using World Bank data, has estimated that the number of poor in India⁴ has more than doubled from 60 million to 134 million in just a year due to the pandemic-induced recession. This means that after 45 years, India is once again a “country of mass poverty”.

According to recent research, monthly earnings for casual and daily wage workers have reduced by 13% (Azim Premji University, 2021).

In another survey⁵ of 11,766 rural households across 11 states almost 40% of the surveyed households stated that they had cut down on food consumption – especially foods like eggs, milk, fish, vegetables, and oil (Rapid Community Response to Covid-19, 2021). Food items that had to be purchased from the market, that is, those that were not provided through the public distribution system (PDS), were not being bought due to the lack of earnings. The same study also showed an increase in loans and pawning by families, and hence the meagre future incomes would also have to be redirected towards repayments.

The above-mentioned studies and several others, point to a bleak situation which is unlikely to improve any time soon. Therefore, more and more rural households will seek work under MNREGA. Four years ago, 11,789 Gram Panchayats did not show any MNREGA expenditure; this number has now reduced to 6,291. This implies that more villages that were hitherto not demanding MNREGA work, are now doing so as this is their last resort to earn and survive. Hence, as the simple calculations above indicate, there is a need for additional funds for MNREGA payments. If the dismal situation of high unemployment on account of the pandemic is recognised, then it would be possible to foresee and prepare for the higher demand for work from households.

Honouring the work-on-demand guarantee

This year if the central government does not acknowledge the dire situation and increase the allocated funds to at least the same amount as last years’ expenditure, the outcome is clear. State governments and their implementation functionaries will start suppressing demand by avoiding initiating any new projects that would provide MNREGA work. This will be their only way of avoiding the difficult situation of providing work with no assurance of funds for wage payments. But then, how will the rural populace – who are facing the brunt of the pandemic-induced lockdowns and their consequences on livelihoods, – live through these times?

The central government needs to be reminded that MNREGA is an Act – it guarantees work on demand for 100 days and in such unprecedented times it is unable to manage even half of the guaranteed days of work. Will the Centre honour the demand guarantee of the Act?

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Notes:

MNREGA offers a guarantee of 100 days of wage-employment in a year to a rural household whose adult members are willing to do unskilled manual work at the prescribed minimum wage.
All MNREGA data mentioned here has been obtained from the official website on 3 December 2021.
This is the prescribed FY2021-22 average wage rate per day per person for MNREGA work.
Those with an income of US$ 2 per day or less in purchasing power parity are considered poor in this study.
This survey was conducted in December 2020 by 43 civil society organisations, which were RCRC (Rapid Community Response to Covid-19) coalition members.