Context: The Union Finance Ministry has capped spending under the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS) at 60% of its annual allocation for the first half of Financial Year (FY) 2025-26.
Until now, the rural jobs guarantee scheme has operated as a demand-driven programme with no such spending limit.
Relevance of the Topic: Prelims: Key features of MGNREGS.
Centre Caps MGNREGS Spending: Rationale of Govt
- The Finance Ministry has placed MGNREGS under the Monthly/Quarterly Expenditure Plan (MEP/QEP), a cash management framework used to control government spending. This restricts the spending to 60% till September 2025 (Second quarter of FY). MGNREGS was thus far exempt from MEP/QEP on account of being demand-driven.
- MGNREGS has long been plagued with financial troubles, which the government hopes to address by implementing the MEP/QEP mechanisms.
MGNREGS plagued with Financial Troubles:
- Data from the Ministry of Rural Development shows that more than 70% of the budget is frequently exhausted by the second quarter of the financial year (FY). While supplementary allocations are often made in the third quarter, even these run out by January. This leaves significant pending dues by the end of the FY.
- Over the last five FYs, pending dues have ranged between Rs 15,000 crore to Rs 25,000 crore. On average, 20% of the subsequent FY’s budget is spent in clearing the pending dues.
- Implementing an expenditure cap may likely ensure an adequate budget will remain for the latter half of the FY, so that no supplementary allocation will have to be made.
MGNREGS acts as a buffer for rural citizens, especially during times of lean harvests, freak weather events, and rural distress. Work demand under the scheme fluctuates throughout the year due to a number of reasons, primarily agricultural activities and weather patterns.
Criticism of the Spending Cap on MGNREGS:
- Constitutional courts have held that financial inability cannot be a reason to disregard statutory or constitutional duties, including in various judgements like- Swaraj Abhiyan v Union of India (2016), Municipal Council, Ratlam vs Shri Vardhichand (1980) etc.
- The 60% spending cap makes it virtually impossible to realise an entitlement that is legally guaranteed under the Act, once the ceiling is reached.
- Further, there is currently no clarity on what will happen once the ceiling is reached. States could be forced to deny employment even when there is demand, or workers may have to work without timely payment.
- In both scenarios, statutory rights of the workers may be violated:
- Right to receive employment within 15 days of raising the demand, as provided under MGNREGA.
- Right to receive wages within 15 days of closure of work, as mandated under the Act.
About MGNREGS:
- MGNREGS provides up to 100 days of guaranteed employment in a financial year to any rural household willing to do unskilled manual work on demand.
- Launched in 2006 by the Ministry of Rural Development.
- Employment must be provided within 15 days of a work demand, if not, the applicant is entitled to an unemployment allowance.
- MGNREGA Act, 2005 mandates that wages must be paid within 15 days of work completion.
- At least one-third of beneficiaries have to be women. Implementation is done by Gram Panchayats.
- The MGNREGA recognises employment as a statutory right. The Act signified a critical shift from employment being a negative right under Article 21 of the Constitution (which mandated that the state must not interfere with your livelihood unreasonably), to a positive statutory obligation on the government to provide employment on demand.