With just a little over a month to go for FY25 to end, the Centre has decided not to release any additional funds for the Mahatma Gandhi National Rural Employment Guarantee Scheme (NREGS), as it feels the outlay of Rs 86,000 crore will be enough for the year. Officials said about Rs 7,500 crore unspent balance from this year’s allocation should cover the remaining period.
The Centre has observed that some well-off states have been diverting funds, turning the scheme into an alternative income source rather than a job guarantee for the needy during off-season periods.
Refuting the statements by some state governments that enough funds are not released for the demand-driven, they said these states first needed to assess their utilisation vis-à-vis poorer states.
For instance, Tamil Nadu with about 1.4% of the poor population estimated in the country, has claimed almost 11% of all NREGA funds released so far in the current financial year, the sources noted. Kerala has 0.48% of the total poor population, but it has used almost 4% of the nation’s NREGA funds. As against this, Bihar and UP, accounting for 26.6% and 17.4% of the poor population, used only 8% and 11.96% of total NREGA releases so far in FY25.
“The highest amount the states had drawn was during Covid at about Rs 1.1 lakh crore when rural distress was real. Is Rs 86,000 crore low in normal times and rural demand is relatively doing well,” an official said. The outlay for next year is also pegged at Rs 86,000 crore.
So far in FY25, the Centre has released Rs 82,684 crore or 96% of the annual outlay of Rs 86,000 crore. As against this, the actual spending is around Rs 94,500 crore, which includes utilisation of some past savings in the scheme as well.
For the past three years, the Centre has been using the Public Financial Management System (PFMS) to track fund utilisation in real-time, monitoring transfers from state treasuries to their nodal agencies (SNAs) for each scheme. As a result, around Rs 4,352 crore remains unspent under MGNREGS. Combined with the balance from the budget outlay, a total of around Rs 7,500 crore is available for use by March.
Tamil Nadu Chief Minister MK Stalin had recently written a letter to Prime Minister Narendra Modi urging the Centre to release the funds without further delay.
Central government officials reckon that one has to correlate what causes developed states with high growth rates and low unemployment to draw more from MGNREGA compared to those who are lower in both and also draw less.
The labour cost in many states including Tamil Nadu is over Rs 1,000 per day and yet, it’s hard to find labourers. The officials are aware that in many such states where labour is expensive, a new trend has emerged doing the MGNREGS work through machines and paying a share of the MGREGS money to the workers who lent their identity to be used in the scheme as workers.
Another issue that has stirred the Centre was that the scheme has been misused to supplement the state budgets for rural works rather than catering to seasonal unemployment.
It has been found that some southern states are using the MGNREGS funds for whatever infrastructure they can build and saving on their own resources for their projects. For example, if such a state is building rural roads, it would use MGNREGS for all the earthwork and topping and the rest of the work would be completed by the state. Similarly, if schools are being built, toilets are built via MGNREGS funds.