Workers load dried grass bales onto a truck near Dahanu Road in Kainad, Maharashtra, India (Photographer: Dhiraj Singh/Bloomberg)

Despite ‘Record’ Allocation, 57% MGNREGS Wages Due Remained Unpaid In April 2018

Ramsajeevan Prajapati, 42, started working under the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS) in 2005 to support his family of nine. He was promised he would get paid every eight days. However, he said, he has not received wages in six months, or the Rs 2,000 due to him from the preceding year.

Prajapati, who previously worked as a labourer at the local market in Mavai village in Uttar Pradesh’s Banda district, has been taking loans to get by. When he complains to officials about delayed wages, he is asked to continue working so that his pending wages get paid, he told IndiaSpend. Often, there is just five days’ work in two months, and MGNREGS wages have not increased his overall income, he said.

Millions of MGNREGS workers share Prajapati’s predicament–57 percent of wages due to workers were unpaid at the end of April 2018, as per government data.

This is the second of our three-part series on India’s vast rural jobs guarantee programme, part of our investigation of key government schemes’ performance in the run-up to the 2019 elections.

Delayed Wages Are Routine

The world’s largest job-guarantee programme, MGNREGS promises 100 days of unskilled work to villagers. However, wage payments have been routinely delayed, sometimes by several months, due to lack of funds, incorrect computation of compensation due or procedural delays.

For the financial year 2018-19, the central government’s fund allocation for MGNREGS increased 14.5 percent over the previous year to Rs 55,000 crore, the highest ever. Yet, the percentage of wages unpaid was 57 percent in April 2018.

Process Of Making MGNREGA Payments

A Fund Transfer Order (FTO) is a demand that is first raised at the district level, and then at the state level for transfer of funds to the worker’s accounts. It is created electronically by the management information system (MIS) that maintains the electronic muster rolls with names of active workers under the scheme.

The FTO needs to be signed by two authorised signatories before being sent to the ministry of rural development. Since transfers are made through bank accounts, the FTO is first sent to the public financial management system (PFMS), a central government online application through which many social security payments are routed, and then to the nodal MGNREGA bank from which payments are credited.

When FTOs are pending, it implies that the PFMS has not responded to them, indicating that the government has not yet approved them. Almost no FTOs were processed for 20 days during March-April 2017, and 80 percent were not processed during May 2017, according to the statement by the NREGA Sangharsh Morcha.

Though payments have been approved by two signatories now, they have not been cleared by the central government.

At the beginning of April 2018, as many as 99 percent of total fund transfer orders (FTOs) were delayed. By the end of the month, however, the authorities had cranked up the payment system to ensure a 42-percentage-point drop in unpaid wages to 57%, after the central government released funds on April 10, NREGA Sangharsh Morcha, an association of MGNREGS activists, told IndiaSpend.

Nevertheless, the preponderant majority of wages, 57 percent, remained unpaid.

Although the government claimed in an October 2017 statement that 85 percent of wages due to MGNREGS workers for the year 2017-18 until September 15, 2017, were paid on time, an independent study has shown this is not true.

Conducted across 10 states from April to September 2017, the study found that only 32 percent of payments were made on time.

MGNREGS wage payment delays have been a long-standing issue–19 state governments had stopped payments in October 2017 primarily due to lack of funds, which in some cases was because states’ audited reports of financial statements had not reached the central government in time to receive funds, IndiaSpend had reported in November 2017.

Nearly 85% of the central government’s allocation of Rs 48,000 crore had already been spent when the article was written, leaving wages amounting to Rs 3,066 crore unpaid at that time.

As of April 12, these 19 states’ status, as per data from the scheme’s website, is as follows:

  • In West Bengal, where payments had been frozen since September 2017, 100 percent FTOs were pending since November 2017.
  • Eight states had 100 percent FTOs pending since February 2018.
  • Assam and Kerala had FTOs pending since January 2018.
  • Six states had FTOs pending since March 2018. Meghalaya, Mizoram and Sikkim, three states whose data were unavailable previously, also had FTOs pending since March 2018.
  • Of the 19 states, Maharashtra and Madhya Pradesh had fewer delayed payments.

Flawed Definition Of Delay

Under the scheme’s provisions, workers should receive wage payments within 15 days of the ‘muster roll’ (attendance register) being closed, that is, after their work is done. If not, they are entitled to compensation at a fixed rate of 0.05 percent of the unpaid wages per day from the 16th day of the muster roll being closed, for the entire duration of delay.

The procedure followed to calculate wage payments is explained in this November 2017 IndiaSpend article. Ideally, workers should be compensated for delays until the day wages are credited into their accounts.

However, the Management Information System(MIS) of MGNREGS, responsible for maintaining records on muster rolls, wages and material payments, only considers delays until the day the FTO is generated at the block/panchayat level (provided it has been generated 15 days after the closing of muster rolls) and sent to the central government. Any delay thereafter by the central government in crediting payments is not considered. As a result, workers do not get the entire compensation they deserve.

To understand the magnitude of this flawed definition, the Azim Premji University study is instructive.

Key Findings

The study was conducted in the states of Uttar Pradesh, Chhattisgarh, Madhya Pradesh, Jharkhand, Rajasthan, Bihar, Karnataka, Kerala, Orissa and West Bengal, for the period April to September 2017, covering 4.5 million accounts.

Overall, 78% payments were not made on time in these 10 states, while as many as 45% payments did not include compensation for delayed payment because FTOs were generated within 15 days.

The biggest difference between government claims and wages actually paid on time is in Chhattisgarh–the government claimed 94 percent wages were paid on time, when in fact 28 percent were. In West Bengal, the claim was for 87 percent timely payments but actually only 17 percent payments were made on time.

In five of the states, more than 50 percent of payments did not include compensation for delayed payment.

When workers do not get their payments on time, they usually resort to borrowing money, and sometimes even food.

“It’s been two months, we haven’t been able to afford milk by ourselves,” Sukhrani, 50, told IndiaSpend. She said the scheme owes her Rs 6,000, and she stopped working some four months back. “We scrounge and borrow to feed ourselves. We don’t even have slippers. You have to take loans to afford things. I’ve borrowed Rs 150 myself.”

The central government is supposed to clear payments within 24 hours of receiving FTOs. However, the study found, when FTOs were generated within 15 days, it took up to 25 days on average to credit the wage payment–from the central government to the states, and the states to workers. This amounted to as many as 53 days in West Bengal, or as few as 10 days in Madhya Pradesh.

Not all of the actual compensation due is paid, as the following table shows.

The study calculated the compensation for delay until the day payments were deposited into workers’ accounts.

These estimates show that MIS missed as much as 86 percent of the compensation truly due. In Kerala, 98 percent of the compensation due was not calculated. In West Bengal and Chhattisgarh, more than 90 percent of the compensation due was missed.

Overall, the study estimated that Rs 7.52 crore should have been paid as compensation during April-September 2017, but actually only Rs 1.03 crore (14 percent) was paid.

In response to the above study, the rural development ministry said on April 4, that it had improved timeliness of wage payments so that wages paid on time had increased from 17 percent in 2016-17 to 43 percent in 2017-18, implicitly admitting that a majority (57 percent) of wage payments due were delayed in 2017-18.

Lack Of Funds, New System, Compulsory Aadhaar Linkage Causing Delays

Ram Naresh, 38, a resident of Banda district in central Uttar Pradesh, started working under MGNREGS 11 years ago, when the programme began. However, he has had no work under MGNREGS since May 2016.

Over a year, he either gets work for a month or 15 days, he told IndiaSpend, as against the 100 days promised. He supplements his unstable wages with other daily-wage work, sometimes traveling as far as six kilometre for work. While he waits for his MGNREGS payments, he has to borrow to feed his four children.

“I haven’t worked for MNREGA since 2016,” Naresh told IndiaSpend. “Not because I don’t want to but because there isn’t any work. They are yet to pay me my remaining amount from last year. Why should I work if I don’t get the money?”

“A primary reason for delayed wage payments is lack of funds,” Rajendran Narayanan, co-author of the above study, told IndiaSpend. “In the first week of December 2017, out of the allocated budget of Rs 48,000 crore for the financial year 2017-18, around Rs 45,000 crore was already exhausted.”

Some Rs 14,000 crore of the budget allocated for MGNREGS in 2017-18 was actually funds that the government fell short of the previous year, thus adding them to the 2017-18 budget, Narayanan said.

Inadequate funding has driven daily MGNREGS wages lower than the minimum agricultural wage in 28 of India’s 36 states and union territories. The difference is as much as Rs 104 (roughly a third) in Gujarat, where agricultural wages are Rs 298 and MGNREGS wages Rs 194 during the current fiscal year, according to this April 2018 article in The Indian Express.

MGNREGS wages are revised every year as per a consumer price index for agricultural labourers (CPI-AL), which reflects a 35-year-old consumption pattern. As a result, in 10 states, MGNREGS wages have not been revised upwards since 2017-18.

In a few states such as Maharashtra and Madhya Pradesh, where MGNREGS wages are higher than the state’s minimum wage, MGNREGS wages have increased by Rs 2.

In August 2017, the department of expenditure of the finance ministry released a memorandum stating that the reasons for delay included infrastructure bottlenecks, lack of funds and lack of administrative compliance.

Yet, in March 2018, the rural development ministry told the Rajya Sabha (upper house of parliament) that delays in wage payments were due to implementation issues at the state level. These issues included inadequate staffing, non-timely recording and reporting of attendance, data entry, generation of wage lists and FTOs, and so on.

The compulsory linkage of Aadhaar, the 12-digit unique identity number, to the bank accounts of MGNREGS workers has also created problems. If Aadhaar numbers are linked with incorrect bank accounts, wage payments can get credited incorrectly.

Experts say all of these reasons act together to delay payments.

Another reason for delayed payments is states’ failure to send audited reports of their accounts on time to the central government, Ankita Aggarwal of NREGA Sangharsh Morcha told IndiaSpend in January 2018.

Yet another possible culprit is the National Electronic Fund Management System (Ne-FMS), the central government’s payment system introduced at the beginning of 2016-17, which gives the central government the sole authority to make wage payments using the Direct Benefit Transfer (DBT) system. Funds go from the central government to a state’s Employment Guarantee Fund, and then to a worker’s account.

Before Ne-FMS, states could use their own funds to make payments during delays and seek reimbursement from the Centre later, Aggarwal said, but not any more.

In the study quoted above, six of the 10 states were under the Ne-FMS system when the study began, and these performed no better or worse than those using the previous system. “In our analysis on delayed payments, there wasn’t any significant improvement seen in crediting wages on time to labourers [through Ne-FMS],” Narayanan said.

“Though it is possible that more FTOs are being generated within 15 days, crediting the amount still takes a long time,” Narayanan said, “The excessive centralisation of payments under Ne-FMS has meant that the baton of accountability is being constantly passed around by the field functionaries of [MGNREGS]. One will often hear field functionaries of NREGA say that they have generated the FTO, but the Centre has not released payments.”

While various agencies pass the buck around, workers such as Gulaab Rani, 65, are disillusioned. “The money gets transferred to the bank. But if it doesn’t even reach the bank, then where are we expected to get it from?” she said, adding, “If they aren’t going to pay me, what’s the point of working at all?”

This story has been produced in partnership with Khabar Lahariya, the country’s only indie, rural media platform, working out of Bundelkhand in Uttar Pradesh and Madhya Pradesh, with an all-women reporters’ network. Nair is a graduate in Economics and Statistics from the University of Mumbai.

This article has been published in arrangement with IndiaSpend.