The central government systematically underestimated the compensation owed to workers for delay in wages under the Mahatma Gandhi National Rural Employment Guarantee Act by at least Rs 689 crore in 2016-17, an analysis of government data shows. The rural development ministry pegged the compensation payable at only Rs 519 crore instead of Rs 1,208 crore, the amount due under the law.

The analysis was carried out for the previous financial year’s data but the systematic flaw in government’s calculations continues into this financial year as well. The study was conducted by Rajendran Narayanan, researcher at the Azim Premji University, along with two independent researchers, Sakina Dhorajiwala and Rajesh Golani.

The Act, which guarantees up to 100 days of work to people in rural India, requires that workers receive their wages within 15 days of completing a week’s work cycle. Failing this, the government has to pay compensation to the workers. The compensation, over and above the due wages, is calculated at 0.05% of the unpaid wages for each day of delay. The provision is meant to deter delays in payments to rural workers who are often in need of immediate money.

But the study shows that the rural development ministry calculates the compensation for only the delay caused by state governments. It does not account for the delay in payments to workers caused by the Centre not releasing funds on time. The loophole lies in how the government has defined “delay” in its formula to calculate the compensation in violation of the law. This formula is fed into the online automated management information system which underestimates the compensation.

The wage payment cycle has several steps. After a worker finishes his week’s cycle of work, an electronic invoice is raised by the village-level officials based on the worker’s attendance. These invoices are signed by two officials at the village or the block level and are then fed into the central server of the central government. At the Centre, the files move to a few more servers, then to a central bank, then to a state’s sponsored bank and finally the payment is made by this bank to the worker’s account.

But the researchers found that the central government had fixed its computerised formulations to ensure that only the delay in the state raising a demand from the Centre through this online system is accounted for. The delays in the state sending the invoice to the Centre and the workers actually receiving the payments in their accounts are not calculated

Flawed system

In May this year, the rural development ministry had confirmed this systematic flaw to Business Standard. A senior official had said the wrong calculations would be corrected shortly, “Part 1 [the delay on part of states] and part 2 [the time taken by the Centre to process the funds and directly transfer the amount to the beneficiary’s account] would both be considered [for calculating compensation].”

That has not happened so far.

Narayanan and his colleagues analysed more than 92 lakh transaction in 3,400 panchayats across 10 states and found that on an average, the Centre delayed wage payments by an average of 63 days, even though states raised invoices within the stipulated 15 days, in 2016-17. Workers received payments within the legally mandated 15 days only in 20% cases. Delays were partially calculated in 47% cases in which the date of second signature on the electronic invoice was made after 15 days of work completion. In 33% cases, no delays were factored in as the date of the second signature fell within 15 days of work completion even though the wages were not paid.

In the transactions they studied, actual compensation was underestimated by 57% by the management information system. On this basis, the researchers came up with the national figure for unaccounted compensation.

“It is completely unclear as to who assumes responsibility for the delays accrued once the invoice is sent to the central server,” said Narayanan. “Moreover, the way the automated information system of the rural development ministry is structured and the method with which the delay compensation is calculated, the Centre, it appears, has completely abdicated the responsibility of payment delays by placing the responsibility and the ‘blame’ squarely on individual states.”

Asked about this, a senior official in the rural development ministry who asked not to be named told “Much of what is getting reflected as delay on the Centre’s part is because the return information [confirmation of payments in the worker’s account] from many post offices and remotely located Grameen Banks is not being fed into the system in time. So while the payments are made, they are not reflected in the MIS. We are working to revamp the MIS in which such flaws will be removed. We have improved a lot and are committed to bring the delays further down.”

The compensation payable because of delay by states, which the rural development ministry calculates, is paid by the states. But if the central government were to do the calculations as per the law, it would have to pay the compensation for delays caused on its part.