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Is MGNREGS losing steam?
Despite its colossal size and spending power, the government’s flagship programme for rural employment is beset with a litany of problems, including large-scale bungling of funds and other instances of malversation. Will the proposed CAG audit of the scheme suffice to bolster its performance?
Issue Date - 30/05/2012
In times of economic duress, even prodigal governments become fiscally constipated. So it happened this fiscal with the Mahatma Gandhi National Rural Employment Guarantee Scheme, launched by the Government in 2006. The allocation for the scheme, entitling employment to poor rural households, was reduced from Rs.400 billion in 2011-2012 to Rs.330 billion in the Union Budget presented by finance minister Pranab Mukherjee for 2012-2013. The whittling down of budgetary allocation for MGNREGS was surprising considering the fact that the programme has been steadily expanding over time. For instance, MGNREGS allocations in the last two fiscals were higher compared to Rs.391 billion in 2009-10, which itself was more than triple the 2007-08 figure.

Naturally, motives are being imputed and eyebrows being raised at this year’s cut. Could it be that the fusillade of criticism directed at MGNREGS in recent months has made the government pause and take notice? None else than a Planning Commission panel recently launched a broadside against the scheme, criticising it for failing to provide assured wages at stipulated rates and in preventing distress migration from rural areas. In its criticism, the panel said that the scheme was unable to reduce distress migration substantially, as workers were not assured of work when they needed it. Assets under MGNREGS had little relevance to livelihoods of the poor and there were significant delays in the payment of wages, the panel said.

The way the scheme has been managed and handled in recent times could be one plausible reason for this year’s cut. But Rural Development Minister Jairam Ramesh, whose ministry is the nodal agency for supervising MGNREGS, maintains that there is no actual downsizing of the allocation. The scheme, ministry officials claim, will still have a fund of Rs.420 billion, based on the opening balance of Rs.60 billion lying with the states, which is over and above another Rs.30 billion of states’ contribution available for the programme. Add to it roughly 10% of the Rs.30 billion as part of the contribution by state governments and voila, there’s Rs.420 billion in MGNREGS kitty this fiscal.

But analysts advise that it is important to wait and watch for the amount the government actually spends from MGNREGS allocation. Last year, the government was able to utilise Rs.310 billion out of the allocated Rs.400 billion. Proponents of the programme aver that the rising tide of government investments in the scheme in recent years has sure helped to lift the economic boats of large swathes of poor rural households. Over the past six years, the scheme – the biggest poverty elimination scheme ever implemented anywhere in the world, offering a social security programme guaranteeing all rural poor households a minimum of 100 days of employment – has provided a staggering 11 billion man-days of work at a total expenditure of over Rs.1,500 billion. The scheme covers 619 districts, 6,000 blocks, 600,000 villages and around 2,35,000 village panchayats.

According to the statistics given out by the Ministry of Rural Development, about 55% of SC/ST families have so far benefitted from work under MGNREGS, of which about 45% are women. Also, under the scheme, the average wages of workers have gone up by 54% over the last five years. And to further cushion MGNREGS workers from the hardships of galloping prices, wages have now been indexed to the prevailing rate of inflation. Thanks to MGNREGS, nearly 100 million of the most impoverished now have bank/post office accounts to show for and around 80% of MGNREGS payments are made through this route. This is an unprecedented step in the direction of financial inclusion anywhere in the globe. A Crisil study on MGNREGS has found that government spending on the scheme boosted wages and raised incomes of both rural and urban households. MGNREGS, the study says, triggered a rural wage increase of more than 20% per year between 2007-08 and 2009-10.

However, not everything has been fair and above board in the way the programme has been run over the years. At different levels, the scheme has been dogged by cases of corruption, financial irregularities and embezzlement of funds ever since its launch. Officials in the Rural Development Ministry privately admit that despite the sprawling size of this flagship programme, evaluation of the scheme’s spending remains spotty as compared to the rigorous evaluation of similar programmes in Latin American countries. It’s therefore not surprising that many cases of malfeasance involving MGNREGS funds have come to light. In Madhya Pradesh, IAS officers S. Singh and C. Borkar were charged with misappropriating Rs.90 million between 2006 and 2007, while district collectors K.P. Rahi and S.S. Ali were accused of diverting Rs.30 million of MGNREGS funds, ostensibly for buying photocopiers and mats for panchayats in 2008. More recently, Jairam Ramesh renewed his demand for a probe by the Central Bureau of Investigation (CBI) into the implementation of MGNREGS in three districts of Uttar Pradesh (Gonda, Balrampur and Sonbhadra) where large-scale misappropriation of funds has come to light. Says Rajesh Tandon, President, Participatory Research in Asia, a civil society and policy advocacy group promoting citizen-centric development in the country: “My guess is that 40% to 50% of MGNREGS funds are not reaching the targeted beneficiaries.” According to Tandon, these irregularities take various forms. “Those who are not deserving of MGNREGS cards have got cards made in their names, those who don’t work are still able to draw payments, those who get paid have to offer a cut, including those who have bank accounts. As payments are made through the banking system, babus there too ask for cuts. The leakages keep happening down the line.”

Realising that MGNREGS has been marred by poor implementation and allegations of massive corruption, Jairam Ramesh has asked the Comptroller & Auditor General of India to undertake a financial audit of the programme. States like Assam, Andhra Pradesh, Bihar, Chhattisgarh, West Bengal, Orissa, Rajasthan, Madhya Pradesh and Uttar Pradesh are among those that will come under the CAG scanner in the first phase of the CAG audit. All implementing agencies, including gram panchayats and independent bodies in these states, will come under the purview of the audit body. In the first phase, the CAG, as an independent body, will investigate the spending of MGNREGS funds in the 12 heavy spending states, which receive nearly 85% of the project’s budget. Also, the Union Rural Development Ministry will soon be issuing orders to make it compulsory for all gram panchayat accounts related to MGNREGS to be certified by chartered accountants.


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