Millennium Post

10,000 crore reasons to be poor

In its first avatar, the United Progressive Alliance (UPA) government felt that it had introduced a game changer in the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA). This feeling was almost ratified by the people of India in the 2009 General Election. Three years down the line, a very different picture emerges of this act. While stories of irregularities in the implementation of the scheme have been doing the rounds, Millennium Post has now discovered that the state governments are not being able to spend the funds allocated by the Union government for it.

According to the figures available with Millennium Post, the Ministry of Rural Development was unable to spend Rs 10,784.95 crore allocated under MGNREGA in the financial year 2011-12. In this year, the Ministry of Finance allocated Rs 40,000 crore for MGNREGA. However, different state governments could only spend Rs 29,215.05 crore in the specified year.

Interestingly, despite the fact that there was under-utilisation of MGNREGA funds throughout the year, the Ministry of Rural Development disbursed about Rs 2,000 crore to West Bengal, Tamil Nadu and Karnataka only in the month of March.

These figures present an unfortunate scenario in a supposedly socialist country like India, where the governments regularly blame the lack of funds for the perpetual bad state of the poor. At a time when the Planning Commission and other branches of the government are fighting over the poverty-line figures, it is not difficult to calculate how many hundreds of people can be pulled out, officially, from poverty with this unspent amount.   

The under-utilisation of the funds may have prompted the Ministry to Finance to cut the budgetary allocation for this flagship scheme. For the year 2012-13, the allocated amount has come down to Rs 33,000 crore. The sharp decline in the budget allocation was surprising, considering the fact that the UPA government has been pushing for this scheme in an aggressive manner. It, in fact, had credited its 2009 victory in the General Election to MGNREGA.

The budget allocation for this scheme has consistently risen since the time the act came into force. In 2006-07, the budget allocation for MGNREGA was Rs 8,813 crore, which rose to Rs 40,100 in 2010-11.

A senior official in-charge of the scheme in the rural development ministry told Millennium Post that one of the prime reasons for this decline is the lack of demand for work, which he attributes to a delay in the payment of wages. 'There have been cases where a person who has worked for 15 days but his payment has been stuck for almost six months,' he says.

With rampant corruption being found in the disbursal of wages through cash, the ministry has taken the decision of disbursing the wages through banks and post offices. However, this idea has compounded the problem of delayed wages. One of the reasons for the delay of payment through banks is that the banking system in India is deposit based rather than being fee based, as is the case in many Western countries. A bank earns profit through the interest on the money deposited, rather than through fees levied on demand drafts. So, for example, if a person has worked for twenty days and his or her cumulative wages are two thousand rupees, the banks generally do not release the amount immediately.

Instead, they wait till the time a substantial amount of MGNREGA wages has been deposited in their account.

An official, who has been directly involved in the process for distributing funds, says that if money is deposited in the account at the beginning of the month, the banks on purpose delay the disbursal till the end of the month, as they account them in their monthly balance sheets.

'This is one of the prime reason why the delay of wages exists through the banking system,' he said.

The other problem that contributes to the problem is the shortage of staff in Gramin banks, as they are unable to cope with the number of MGNREGA accounts that have been opened.

Officials from the rural development ministry lament that since they do not have jurisdiction over the working of banks and posts offices, they cannot do much about it.

'Our hands are tied. Even if banks and post offices delay payment by six months, we cannot take any action,' says an offical from the ministry.

Sources say that they have taken up the case of delay in payment of wages at district levels and block levels, but as of now, no action has been taken by the bank officials in this regard.

While the problem of delay of payment has been discussed between the officials of the Ministry of Finance and the Ministry of Rural Development, no decision has been taken so far.

A look at the figures of few states actually points out the acuteness of the problem when in it comes to the delay of the payment of wages. For 2011-12 , there are 2,67,607 muster rolls in Bihar where payment has been delayed by more than three months. The situation is no different in other states. In West Bengal, there are 1,98,510 muster rolls where payment has been delayed by over three months.
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