Spending Cap on MGNREGS
The Indian Union Finance Ministry has introduced a spending cap of 60% on the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS) for the first half of the Financial Year 2025-26. This marks change as the programme was previously exempt from such limitations. The decision aims to address ongoing financial challenges within the scheme but has raised concerns among civil society and worker unions.
Background of MGNREGS
MGNREGS was established in 2005 to provide up to 100 days of guaranteed employment to rural households. It serves as a safety net during economic distress, particularly in agriculture-dependent regions. The scheme is demand-driven, allowing households to request work as needed.
Reasons for the Spending Cap
The Finance Ministry’s rationale lies in persistent budgetary issues. Over the years, more than 70% of the annual budget has often been exhausted by September. This leads to pending dues, ranging from Rs 15,000 crore to Rs 25,000 crore by the fiscal year’s end. The cap is intended to ensure funds remain available for the latter half of the year and reduce reliance on supplementary allocations.
Financial Context
For FY 2025-26, the MGNREGS budget is set at Rs 86,000 crore. As of June 2025, 28% of this budget has been released. However, pending dues from FY 2025 are approximately Rs 19,200 crore, which could consume nearly 50% of the current budget if not addressed.
Impact of Fluctuating Demand
MGNREGS demand fluctuates based on agricultural cycles and weather conditions. For instance, in 2023, Karnataka saw a 20% increase in demand due to low rainfall. The spending cap does not account for these fluctuations, potentially leaving rural workers without employment during critical periods.
Legal Implications
MGNREGS is enshrined in law, recognising employment as a statutory right. The Finance Ministry’s cap raises legal concerns regarding the fulfilment of this obligation. Courts have previously ruled that financial constraints cannot excuse the failure to meet statutory duties. Thus, the cap may violate the rights guaranteed under the MGNREG Act.
Uncertainty for Workers
The cap creates uncertainty about employment availability once the limit is reached. States may have to deny work despite demand, or workers could face delays in wage payments. These scenarios pose risks to the statutory rights of workers, including timely employment and wage payments.
Concerns from Civil Society
Civil society groups and worker unions have expressed alarm over the cap. They argue it undermines the spirit of MGNREGS and threatens the livelihood of rural workers. The decision could lead to increased poverty and distress in rural areas, contrary to the scheme’s original objectives.
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