Tamil Nadu Chief Minister C Joseph Vijay has raised serious concerns over the Centre’s newly launched rural employment scheme, warning that its current funding structure could place an additional burden of over Rs 5,000 crore on Tamil Nadu’s finances, potentially affecting welfare spending and rural employment delivery across the state.

In a letter addressed to Prime Minister Narendra Modi, the Tamil Nadu CM sought immediate changes and relaxations in the newly introduced Viksit Bharat–Guarantee for Rozgar and Ajeevika Mission (Gramin), or VB-G RAM G, which officially came into effect from July 1, 2026.

Why Tamil Nadu fears a Rs 5,000 crore burden

At the heart of Vijay’s concerns is the scheme’s new funding formula, which requires states to share expenses with the Centre in a 60:40 ratio for wages, construction materials and administrative costs.

The state government argued that this marks a sharp departure from the structure followed under the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS), which has operated under a different financial framework for nearly two decades.

According to the Tamil Nadu CM, shifting to the new formula would significantly increase Tamil Nadu’s expenditure, forcing the state to divert funds from other welfare programmes. He warned that the move could impose more than Rs 5,000 crore in additional annual burden on the state exchequer.

Fear of reduced wages and fewer working days

The Tamil Nadu government cautioned that unless the Centre revises the framework, the new cost-sharing mechanism could directly affect rural workers. The Chief Minister said the financial strain may lead to lower wage payments, fewer guaranteed workdays under the scheme, and reduced allocations for other critical welfare initiatives run by the state government.

To prevent this, the state government demanded that the Union government continue providing 100% financial support for wages and administrative expenses, similar to the previous structure. For construction materials, the state proposed a revised 75:25 funding split, with the Centre bearing the larger share.

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State objects to centralised fund allocation system

Another major concern raised by Vijay relates to the proposed mechanism for distributing funds to village panchayats. Under VB-G RAM G, the Centre plans to introduce a uniform national formula for classifying village panchayats and deciding fund allocation.

The Tamil Nadu government argued that this “one-size-fits-all” approach ignores socio-economic diversity across states, potentially leading to unequal fund distribution at the grassroots level. The Chief Minister demanded that states be allowed to design their own methodology for allocating funds based on local realities and field-level requirements.

Flexibility sought during agricultural seasons

The Tamil Nadu CM also objected to a provision requiring states to declare a fixed 60-day period every financial year covering sowing and harvesting seasons, during which rural employment work must be suspended.

The state government says such rigid timelines reduce flexibility at the ground level, especially given differing agricultural cycles across regions.

Vijay requested greater operational freedom so local authorities can decide work suspension periods depending on actual agricultural activity.

Housing scheme exclusion triggers fresh concern

The Chief Minister also flagged concerns over housing provisions under the new scheme. While VB-G RAM G allows convergence with Union government rural housing schemes, it currently excludes state-funded housing programmes.

Tamil Nadu argued that this could hurt its own “Housing for All” push, particularly programmes focused on providing homes for rural poor and tribal communities. The state demanded inclusion of state-run housing schemes under the framework to accelerate rural housing delivery.

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Tamil Nadu cites strong track record in rural employment

In his letter, Vijay reminded the Centre that Tamil Nadu has consistently been one of India’s best-performing states in implementing rural employment guarantee programmes. He said incorporating the proposed changes would allow the scheme to function more effectively while ensuring better rural development outcomes.

The Chief Minister urged PM Modi to reconsider the framework, warning that failure to make changes could severely hamper implementation at the field level and negatively affect millions dependent on rural employment schemes.