MGNREGS discussions must go beyond budget allocations

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Union finance minister Arun Jaitley’s claim that he was making the highest ever allocation to Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS) in this year’s budge made headlines.

Here are five questions which can help understand why MGNREGS related discussion needs to go beyond talks of budgetary allocation.

Is 2017-18 record allocation for the MGNREGS?

2017 budget has set aside Rs48,000 crore for the MGNREGS for 2017-18. This is marginally more than Revised Estimate value of Rs 47,499 crore for 2016-17. Yamini Aiyar, director of the Accountability Initiative, amount of Rs 53,594 crore has been already been spent on the scheme in FY2016-17 (till 1 February, 2017).

Deflating MGNREGS allocations with Consumer Price Index Rural (CPI-R) with 2012 as the base year shows that real allocation for MGNREGS in 2017-18 might come down from 2016-17. We have taken annual CPI-R values from 2011-12 onwards to make these calculations. For 2016-17 these values are for quarter ended December and 2017-18 budget’s estimate of average 4% inflation has been used to extrapolate average CPI-R for 2017-18. These adjustments mean that real allocation figures for 2016-17 and 2017-18 would be slight overestimates.

Are delayed payments undermining MGNREGS?

In 2016-17 (as per data till 7 February), over 53% of total payments under MGNREGS have been delayed by 15 days or more. Although, this is lower than the share of payments delayed in 2014-15 and 2015-16, delayed payments have increased in comparison to 2012-13 and 2013-14. This is despite the Supreme Court asking the government to ensure prompt payments under the scheme in November 2015. If potential job-seekers start believing that payments would be delayed, it is likely that they would not seek work under the scheme.

Did demonetisation lead to a spike in demand for MGNREGS work?

A lot of anecdotal accounts have suggested that workers who lost their jobs due to demonetisation induced slowdown started queuing up for MGNREGS jobs from November. A comparison of MGNREGS statistics for this period with previous years does not substantiate this claim in an unambiguous manner.

While demand for jobs increased by 3% in November 2016 over the previous month, data shows that month-on-month increase in job demand in November and December has been much higher in earlier years. In 2013-14, a non-drought year, job demands under the scheme increased by close to 9% over the previous month. The increase in December has been much higher in each of the five years for which data is available.

Though MGNREGS jobs are supposed to be made available all through the year, work under the scheme tends to wind down when monsoon sets in and farming activities begin. Experts say this is partly to avoid conflict with farmers who tend to complain about having to pay higher wages if MGNREGS works are on. Besides, construction activities are hard to implement during monsoons.

What drives MGNREGS: demand for jobs or supply of funds?

Only 86% of the households that demanded employment under MGNREGS were provided employment in 2016-17 (data till 7 February)—the lowest in the last five years.

MGNREGS works on the principle of employment guarantee, wherein failure to provide employment should lead to the government paying the applicant the stipulated wage.

Reetika Khera, an associate professor of economics at IIT-Delhi says that most people do not know about this provision, and wait for MGNREGS work to open in their villages, which in turn depends on supply of funds. This has turned the scheme upside down from being demand (for jobs) driven to supply (of funds) driven. Khera added that there have been very few cases where unemployment allowance has been paid due to failure to provide work.

Is MGNREGS just digging holes and filling them up?

One of the major criticisms of the MGNREGS has been that it leads to wasteful expenditure because of lack of creation of productive assets.

Jaitley highlighted in his budget speech that the target of pond construction and compost pits for the current year under the scheme will be fully achieved. However, ground based studies show that headline figures on asset creation under MGNREGS can be misleading.

The paper is based on a field survey of wells constructed under MGNREGS in Jharkhand which found around 8% of the official completed wells were simply missing. The paper also gives details of how delay in payments leads to abandoning of projects midway, in this case leading to dug wells being filled with mud again, implying a loss of utilised resources. In many cases, people also complained of having to pay bribes or being forced to incur huge private expenditure.

The short point is, for the MGNREGS to live up to expectations, political will to sincerely honour government’s commitment of proving employment must be complemented by reforms at grass root levels, which ensures that the money spent under the scheme is not used to dig wells on paper.