MGNREGA: Will it Empower Rural India?


Different Truths serializes JAMMAI that focuses on the development in India. An initiative of the present government, it’s an ambitious project. We hope that the blueprint on paper matches the political will of the Modi government. Here’s the fourth part, MGNREGA, of the six-part article. Here’s an in-depth report by Anirban.

The fourth topic in the JAMMAI series is the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA).

National Rural Employment Guarantee Act 2005 or NREGA, later rechristened as the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA), is an Indian labour law and social security measure that guarantees the ‘right to work’. It aims to ensure security in rural areas by providing at least 100 days of active wage employment in a financial year to every household whose adult members volunteer to do unskilled manual work, according to a trusted source. Here are some changes in MGNREGA that might help.

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1. Age: The ‘adult’ age in the rural household may be brought down to 15 years, instead of 18 years. In rural areas, persons under 15 years of age will have to spend at least 1500 hours/year for three years in a nearby school to qualify the age limit.

2. Block: ‘Block’ may be redefined as a single entity of a gram panchayat, instead of a conglomerate of gram panchayats. Each panchayat will have a representative from individual homes.

3. Wage: Minimum ‘wage’ may be increased to at least INR 200/ day or INR 50/hour at some stage. Please note that only a minimum wage is guaranteed to the unskilled individuals, when they are not working.

4. Timeline: The ‘timeline’ may be changed to at least 120 days or a quarter of active employment days, instead of 100 days. But, at least 50 days can be a guarantee of payments/work. Fifty days of minimum payment comes to 2500 INR/ month, which can be a guarantee.

5. Social Audits: ‘Audits’ that will serve long for the actual effective implementation of  MGNREGA via a labour card attached to the working individual. The labour card will be similar or an adjunct to the Aadhar Card or unison with the same. It will contain the details of remuneration received, minimum wage fixed, age, domicile details, grievance details, days worked in a linked separate database connected to the labour card. All this is fed into the information systems for audit and planning purposes.

6. Link to the Aadhar Card: The labour card may be linked to the Aadhar card bank details along with mobile details for financial inclusion as an entire gamut. The wages get disbursed immediately to the individuals, within the 20-20-60 ratio, which means 20% pre-paid, 20% at the end of the work, and 60% within 20 days of completing work.

7. Uniform Labour Code: The minimum wages must be same across geographies, instead of variations in minimum wages across ranges to address skew in geographies. 8. Labour Statistics: The labour card is also a supplement to the individuals working in the fields of paddy. This labour card also provides all the necessary details of the individuals, not just in MGNREGA.

9. Post Office, Bank and Insurance: The labour card is activated with a payment bank-namely post offices, or any other financially inclusive banks so that the wages are dispersed in these accounts. Even payment banks may provide small micro-insurances.

10. Minimum grace period: The maximum period for the grace for disbursing of wages can be 20 days. Any payment beyond that can accrue 1.5% additional cost to wage, per month.

11. Link Work to Wages: The amount of work-load borne can be calculated while providing wages. An information system would record this.

12. Transparent system: To reduce the wage distribution, certain blocks of gram panchayats will have to be recognized to launch MGNREGA with full weights. This would be based on certain economic indicators.

13. Disbursing of wages: The direct cash settlement happens for the first 20% of the wage; the rest through the payment banks only. The biggest factor of payment bank or financial inclusion is the use of debit/credit facility in the payment bank.

14. Work Chunk: The work would be in finite chunks using estimation of work for MGNREGA, not based in time-lines. This would require calculation of man-days at work. 15. Withdrawing money: The head of the family is a joint account holder of the payment bank along with the individual working under MGNREGA. This would involve a withdrawal transparency.

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The other dimensions of MGNREGA are economic security, self-targeting, women’s empowerment, asset creation, corruption, how the scheme impacts agricultural wages.

Some more pointers for the MGNREGA are as below:

  1. The Supreme Court can facilitate setting up of NREGA mobile courts in every district, with accordance to the state courts. This will follow up for social audit findings of financial  irregularities within the given district and deliver justice faster. A social audit takes note of the experience of beneficiaries. Conducting audits cost states around Rs 22-90 crore depending on the size and the number of districts.

  2. While the social welfare scheme does seek to address many pressing issues it fails to provide for a comprehensive framework that will enhance the productivity and sustainability of the scheme’s outcomes. The introduction of a project list and a local committee might help in planned asset creation but it still does not make way for planning over a longer timeframe of five to six years which is needed for watershed and drought proofing projects.

  3. Some critics think that MGNREGA has led to low agricultural productivity, but, 70% of rural job scheme happens during the non-farm season and hence such conclusions are baseless. MGNREGA will also help the rural sanitation projects, as for the first time toilet building, soak pits and solid and liquid waste management have been included under MGNREGA. He said, though the overall 60:40 ratio of labour and material component will be maintained at the Gram Panchayat level but there will be some flexibility in the ratio for certain works based on the practical requirements.

  4. Can the state governments direct the MGNREGA labourers to open bank accounts under PMJDY and transact their part of the wages through the accounts? The scheme may start with post-offices first, as an inclusion program. The Banking Correspondent (BC) model will help people in rural areas to open bank accounts and transfer existing accounts from post offices to banks. Labourers can get their wages through the BC in their village itself. The accounts of labourers would be transferred to banks in a phased manner, adding that priority would be given to blocks which are fully developed and has good banking network. The government would transact the wages to the labourers by transferring money to their bank accounts through use of e-muster and electronic fund management system.

  5. The statistics and programme implementation ministry can constitute and develop a mechanism to evolve a framework to create a separate index to update the MGNREGA wages and related issues, in keeping with the situation prevailing in the rural areas. Since real wages, as opposed to nominal wages, are adjusted according to changes in inflation-rate, the government can devise a way to make the wages provided under the scheme amenable to variations in inflation levels. The rural development ministry can take a step in this direction by delinking the wages paid under MGNREGA from the Minimum Wages Act, 1948. In future, it can be necessary to arrive at a real wage of Rs 100 per day to provide a basis for any further revision. For this, it’d be necessary to develop a mechanism that would be able to create a separate index for NREGA wages as the current WPI/CPI does not capture the occurrence of real inflation at the village level.

  6. The convergence of the Member of Parliament Local Area Development (MPLAD) scheme with the rural employment guarantee scheme MGNREGA can create more durable assets in the country. Under the MPLAD scheme, sitting Members of the Parliament are allocated Rs. five crore per annum to spend on various types of development works. Government has enhanced the fund allocation under the scheme for every MP to Rs. five crore from Rs two crore. Funds from MPLAD scheme can be converged with MGNREGA with the objective of creating more durable assets. In the new framework, under the MPLAD scheme, MPs may recommend works from out of the shelf of MGNREGA projects approved by the Zilla Panchayat for the year. But as far as possible, the MPLADS Funds will be used in respect of material component only. The guidelines of MGNREGA have to be followed and the Gram Panchayat can be nominated as the Implementing Agency by the District Planning Committee (DPC). The DPC can provide adequate technical support to the Gram Panchayat to implement the works. Since the material and labour components are expected to flow simultaneously, it will not be necessary in these convergence cases for MPLADS Funds to be used only at the end. The accounts of expenditure would have to be maintained separately for both the schemes. A joint plaque indicating the cost involved, contribution from MPLADS/ MGNREGA, commencement, completion and inauguration and the name of the MP sponsoring the work under should be permanently erected.

  7. The Centre can give CAG a place in social audit of rural job scheme and direct the states to set up directorates to train auditors from civil society. A nominee of CAG can be present in social audits that gram sabhas would conduct twice a year. CAG would also do an annual audit as part of its mandate. Coupled with the rigour of CAG’s accounting, the exercise would also bring in the new concept of social audit into mainstream. The new audit regime — finalised by the rural development ministry and being supported by the Union law ministry — follows a recent submission in Supreme Court, which that there had not been any accounts audit of MGNREGA in the past five years save for a sample performance by CAG that was carried out in 68 of 625 districts. The social audit under gram sabha would be under the states’ jurisdiction, CAG’s freedom to participate in it would help both. It would not only bring an auditing expertise to the gram sabha exercise, but would also acquaint the top accounts watchdog with the intricacies of MGNREGA’s functioning. Sources said the job scheme involves works like digging and desalting that are difficult to quantify unlike civil activities that can be assessed physically. It is only the locals who know the tricks by which monies in job scheme are misappropriated. CAG’s presence in social audit would help the top accountant in understanding the job scheme as much as it would help the quality of social audit. Under new rules, the states would set up a directorate of social audit to train civil society in auditing skills. CAG can also help in the exercise of capacity building. The Centre has rejected the demand from activists that gram sabhas, which are the implementing agency under job scheme, should not audit its own work.

  8. Can the rubber board tie-up with MGNREGA? Can other state welfare schemes tie-up with MGNREGA to create durable assets through rural employment? The convergence scheme will operate at two levels. Persons eligible under the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) to work on private land or homestead will manage the plantation, thus creating permanent sources of livelihood. At another level, workers who do not meet these criteria will work in these plantations. The board will identify the land suitable for rubber cultivation and prepare the list of beneficiaries under MGNREGA, who are eligible to work on private land. The village panchayat will be given this list, and the eligible beneficiaries interested in the scheme will form a self help group or rubber production society board to carry out the work of the plantation. Additionally, MGNREGA workers who are not eligible to work on private lands will be able to take up the specific tasks like clearing.

  9. The government can recast the Mahatma Gandhi National Rural Employment Guarantee Scheme, to give it a welfare edge, following criticism that it was disconnected from people’s concern over corruption, high food prices and inflation. The attempt will be to make it more responsive to people’s needs and increase earnings of the rural poor. The reform attempts to make the scheme truly demand-based, besides addressing issues of fraud, misuse of funds, corruption and structural problems like delayed payments. While implementation has been very uneven across states and districts, four positive impacts are visible – agricultural wages have increased, distress migration has shown a decline, area cultivated in some states has increased and water conservation structures have been built and in many cases, have been revived. On a large scale and its true potential as an instrument of rural the transformation is yet to be fully realized.

  10. Can we distribute cell-phones under MGNREGA? One person per family registered under MGNREGA scheme will be provided with the cell phone for which a recharge of Rs 30 per month, and will be provided for free for two years. This will entitle the users 30 minutes of airtime, 30 SMSes and 30 bps net or data usage per month. If users cross the Rs 30 limit, they will have to get a recharge at their own cost. To get the cell phone, the beneficiary will have to pay Rs 300. Can the central government introduce Electronic Fund Management System (e-FMS) in all states to disburse wages more speedily to MGNREGA workers? This system will enable the authorities to disburse funds to the MGNREGA workers quickly. So, the central government can introduce the system throughout the country. So, we see the flagship program of UPA may get a boost in the current Modi regime. It now depends on the political will of the current government to give it the necessary push, failing which it would be the proverbial old wine in new bottle.

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Anirban Kar

Anirban Kar is a technology and business consultant, who has earned his education degree in two continents, the USA and from India. His work started from 2003 in TCS, and comprised
of various clients ranging across geographies. His area of interest is business modeling,
enterprise architecture and investment analysis.