Why aren’t the poor in drought-affected states getting state assistance when they most need it?

The Supreme Court has strongly reprimanded the Modi government for not releasing adequate funds on time under the Mahatma Gandhi National Rural Employment Guarantee Act, or MNREGA, for rural workers especially in drought-hit states.

Under the Act, the government provides a guarantee of up to 100 days of wage employment in rural areas to any household whose members are willing to do manual work. Started in 2006, it draws from the Maharashtra Employment Guarantee Act of 1977, which was enacted after policymakers found that providing wage employment was the most effective and quick way of providing relief to people facing drought.

On April 6, a bench comprising Justice MB Lokur and Justice NV Ramana directed the Centre to release funds immediately, and “not after one year”. It told the Centre: “If you are not releasing funds, no one will like to work.”

The Supreme Court was hearing a public interest litigation filed by Swaraj Abhiyan, a political campaign, seeking relief for drought-hit regions in the country.

On April 7, while continuing its hearing, the judges said the provision of employment opportunities in rural projects had been turned into a “chicken and egg situation” by both the central and state governments. While the Centre said that there was not enough demand for work in the states, the states, in turn, said that the Centre had not allotted enough funds for them to effectively run the programme.

In his 2016-17 budget speech, finance minister Arun Jaitley allotted Rs 38,500 crore to the rural employment scheme, while claiming: “If the total amount is spent, it will be [the] highest budget spend on MGNREGA.” Jaitley added that the scheme would focus on creating 5 lakh farm ponds and wells, and 10 lakh compost pits for the production of manure.

But despite the Modi government claims that it has allotted substantive funds to the scheme in its last two budgets, why is there still a shortage of funds?

Here are three reasons.

1. Growing pending liabilities

The Modi government’s claim that it has allocated the highest ever outlay of Rs 38,500 crore to the scheme is not true. In fact, the highest-ever outlay since the scheme was first implemented in 2006 was Rs 40,100 crore, in 2010-11.

Despite prime minister Modi labelling the programme “a living monument to the failures of the Congress”, his government, in its last two budgets, has maintained the outlay for the scheme at levels close to the previous year’s allocation. But when you take inflation into account, this means a decline a real terms.

For the last five years, the central government has allotted too little money to run the scheme to guarantee 100 days of employment. This means that at the end of each financial year, states have not had sufficient funds for its workers, or to pay the cost of materials used under the scheme.

These pending liabilities were Rs 3,378 crore in 2012-13, and Rs 5,513 crore last year – nearly 16% of the last budget’s allocation to the programme. The outstanding amount has now nearly doubled to an unprecedented Rs 12,483 crore. This means when the Centre releases funds for this year – it told the apex court on Thursday that it will release Rs 11,030 crore in the coming week – the states will spend a substantive amount of that money just to pay back wages. Currently, the Centre owes Rs 7,983 crore to rural workers in wages for last year. Also, since funds are being released after work is done, states don’t have funds to open new public works under the scheme.

A crucial question is: What happened to those unpaid workers last year? Have they already migrated to cities in distress this year?

2. Quota-based labour budgets

MNREGA is demand-driven scheme that guarantees 100 days of employment. This means when a rural household demands work, the government has to create and provide that work within two weeks. Members of a rural household share the 100 days of work among themselves, and the scheme aims to particularly enable women, the elderly, and other vulnerable rural households to find work locally while building useful public assets for the village, and on farms of poor marginal farmers.

Since the scheme is demand-driven, the budgetary allocation for MNREGA is supposed to be indicative and open-ended – not fixed as in the case of other centrally-sponsored schemes. The Ministry of Rural Development asks states to put forward a labour budget to arrive at labour and work projections so that it can allocate money based on this estimate. States calculate this in terms of person-days. If five workers are expected to work on digging a village pond over five days, this is estimated to be 5 x 5 = 25 person days. The government then derives what will be the cost for one person-day in terms of paying wages. It adds the cost of material to it, and allocates funds accordingly.

While this is supposed to be an indicative exercise, the central government has turned these into fixed quotas that states are encouraged to not exceed. This dilutes the employment guarantee offered by the programme, which is the rural poor’s legal entitlement. It also makes it difficult for states to offer timely wage employment opportunities in situations like the present, when drought affects more than one-third of the country.

There are 13.2 crore job cards, or households, working under MNREGA. Of these, 5.7 crore are "active" workers’ job cards as per the central government. For a guarantee of 100 days of work, the government would have to budget for 570 crore person days. But in the Supreme Court on April 7, the petitioners showed the court that as per center's submissions, state governments had submitted a projection for only 314 crore person days for 2016-17. Of this, the empowered committee at the center had accepted the demand for merely 217 crore person days, which translates to only about 38 days of work in the year per household (217/5.7 = 38).

The central argued that they are hoping to reach 50 days on average per worker and are confident that they will this year. Justice Lokur pointed out that there is a law, and it says 100 days.

3. No additional funds even after a drought notification

Last year, when eight states notified a drought – Uttar Pradesh, Andhra Pradesh, Jharkhand, Chhattisgarh, Madhya Pradesh, Odisha, Telangana – the Centre notified an additional 50 days of employment under the programme, taking the guarantee of employment to 150 days in these drought-hit states.

But it did not provide additional funds for these extra 50 days. In fact, at the time, four of these states – Uttar Pradesh, Andhra Pradesh, Chhattisgarh, Madhya Pradesh – had a negative balance of funds of Rs 1,455 crore, which meant that these states owed workers money for work they had already done. The 150 days notification lapsed in March, but the drought conditions have worsened.

Yogendra Yadav of Swaraj Abhiyan that filed the petition seeking relief for drought-hit regions in the country, said that the petition had exposed “the government’s sophistry” in undermining the rural works scheme. “MNREGA is a demand-driven scheme, it is the poor’s legal entitlements,” said Yadav. “We presented a government circular issued to all states in which they are telling states ‘You should not exceed the labour budget presented by you in no circumstances without our prior approval’. In this way, an illegal ceiling has been imposed by the central government.”

On April 7, Aparajita Sarangi, joint secretary in the ministry of rural development who was present in the court said that the government will release funds under the scheme immediately and add more funds, as required, later. “We will release Rs 11,030 crore next week, of which Rs 7,983 crore is wage liabilities,” said Sarangi. “The next allocation will be by June after we have scrutinised states demands. We have indicated to them that whenever there is a need, we will release more funds.” On April 9, the ministry of rural development announced it will release Rs 12,230 crore to states.

The next hearing in the matter is on April 12.