PM Modi is right on PMGSY: Faulty design, lack of focus plaguing MNREGA

New Delhi: The Congress and its leader Rahul Gandhi came in for a sharp attack from Prime Minister Narendra Modi today in Parliament. Modi pulled no punches while rebutting many allegations made yesterday by the Congress scion but specially, the one on the rural employment guarantee scheme was answered with a sharp retort. Gandhi had accused this government of falling back upon the Congress' flagship rural employment scheme MGNREGA, after initially criticising it.

The PM replied to this charge in two parts. Not only did he refer to the reports of the Comptroller & Auditor General (CAG) which alleged irregularities in the MNREGA implementation in 2012 during the UPA's own regime, the PM also said that a scheme started for building roads is helping poor states more than rich ones. What he managed to portray through these comparisons between MNREGA and the Pradhan Mantri Gram Sadak Yojana (PMGSY) is that his government is better at implementing schemes meant for the poor. Or is it? Better targeting of PMGSY may be due to the very nature of the programme and may not be a benchmark of the efficiency of the government of the day.



NC Saxena, Distinguished Fellow, Skoch Development Foundation and former Planning Commission member notes the difference in how the two programmes are structured in this paper while explaining the relative success of one versus the other.

He says that unlike MNREGA, PMGSY fixes state-wise allocations based on pre-determined gaps in infrastructure and funds are released accordingly, thus benefitting states with poorer infrastructure more. "MNREGA follows a ‘free-for-all’ strategy with the result that better governed states corner most of the funds irrespective of low incidence of poverty in those states."

Saxena notes that the other big difference between the two schemes is in their approach to creation and maintenance of assets. Three Tier Quality Assurance Mechanism is have been institutionalised in the design of PMGSY to promote independent monitoring of assets but these functions for MNREGA are delegated to elected institutions at the village level. As both implementation and social audit is to be done by the same panchayat, conflict of interest develops.

So Mr Prime Minister, you are right about PMGSY being better suited to alleviate poverty but this has little to do with the government's efficacy in implementing this scheme and much more to do with the way the scheme was designed.

What ails MNREGA

Last year, while replying to the debate on the motion of thanks to the President’s address in Lok Sabha, Prime Minister Narendra Modi had said that MNREGA was a living monument of poverty in the country. Since then, the Modi government has obviously done some re-think on the efficacy of this scheme since no one now refers to the scheme and poverty in the same breath.

In fact, with the Budget of Finance Minister Arun Jaitley entirely focused on reviving the rural economy though, it is no surprise that MNREGA is now the cynosure of all eyes.

The allocation for MNREGA was the "highest ever" according to the FM at Rs 38,500 crore for 2016-17 against Rs 36,967 crore for the current fiscal. MNREGA guarantees 100 days of employment to a household or an unemployment allowance within 15 days of an applicant seeking a job under it. Enhanced allocation for next fiscal could mean the scheme may get more people employment or an unemployment allowance (which the states are mandated to offer if no work is provided within 15 days of request).

But a glance at the parameters so far, even under the NDA government, does not paint a pretty picture of this scheme. The 21 months of this government have shown improvement in some parameters under the MNREGA compared to the last two-three years of the UPA regime but even now, the scheme needs far better focus. And yes, it could do with more funds than allocated for even 2016-17.

According to the latest data from the ministry of rural development

1) Only 6.35% households or 27.17 lakh households have completed 100 days of employment as of February 25. Though the ministry says another 38.58 lakh households are expected to reach the 100-day employment completion benchmark by March 31, this obviously leaves a lot to be desired as far as offering employment to the needy is concerned. During 2014-15, only 24.92 or less than 6.35% households had completed 100 days of employment. Will increased Budgetary allocation for MNREGA in FY17 help more households find jobs?

2) Delayed wage payments is one of the biggest problems under MNREGA. Even when employment is offered under the scheme, delayed payments don't help the intended beneficiary in any way. According to the ministry's own statistics, 45% of payments under MNREGA have been made in the stipulated time period against just 28% in 2014-15. This is an improvement for sure but look at it this way: more than half the payments are still delayed. The ministry has already introduced the facility of electronic transfer of payments in Kerala from January to ease this payments delay and 10 more states are to be brought into this scheme through 2016-17. It remains to be seen whether these efforts are enough to cut wage delays substantially.

3) Lets now look at total expenditure under the scheme. In 2012-13, the penultimate UPA year, Rs 39,778 crore were spent under MNREGA and this fell to Rs 38,553 crore in 2013-14. In the first year of the NDA too, the expenditure on this scheme declined further to Rs 36,024 crore. But now, ministry officials say Rs 47,000 crore is the estimated expenditure for the current fiscal, of which Rs 43,000 crore has been spent till February 25. This includes the share of states' expenditure too under MNREGA.

4) This brings us to another issue plaguing this programme. Each year, back payments or payments of arrears under MNREGA have been criticised by social activists who say this propensity then leads to under-funding and delays in release of payments to states. According to ministry officials, pending liability this fiscal (which will be carried over to 2016-17) is estimated at Rs 6500 crore, a tad lower than the Rs 6955 crore carried forward this fiscal from 2014-15.


Did this scheme help the poor better than MNREGA? According to the latest data, Bihar got the largest chunk of funds to develop rural roads among all states and union territories in 2015-16 (till February 22) at Rs 2,481 crore. This was the second year running when BiIhar managed to get the maximum share of central funds under PMGSY. The state connected 1,606 habitations by constructing 2,597 km of roads under the scheme in 2015-16 till February.

West Bengal was the next biggest beneficiary at Rs 1315.59 crore followed by Odhisha at Rs 1246.27 crore. West Bengal connected 244 habitations by constructing 1,401 km of roads whereas Odhisha connected 933 habitations by building 2,631 km of roads till February this fiscal.
These three eastern states are, aruguably, among the poorer Indian states. So even if we disregard the spends these states additionally contributed to the PMGSY this fiscal till February, it is clear that they outstripped richer states like Tamil Nadu and Maharashtra in getting central funds for rural road building. By the way, Tamil Nadu got just Rs 200.39 crore while Maharashtra got Rs 492.19 crore from the Centre.

So the claim by the Prime Minister today about the efficacy of rural road building under PMGSY is partly true. But look at the states which got the least funding under this scheme till February - Nagaland at just Rs 4 crore, Sikkim Rs 48.87 crore and Karnataka Rs 63.78 crore were at the bottom of the funding pyramid. Why are north eastern states, where the Central share of total funding under this scheme is 90% against only 60% for others, is a poser.

The total funds released by the Centre under this scheme in 2015-16 (up to February 22) were the highest in four fiscal years at Rs 12,775.66 crore.

In his Budget speech, Finance Minister Arun Jaitley proposed an allocation of Rs 19,000 crore for this rural roads programme, saying together with the contribution of states, the government will spend Rs 27,000 crore in 2016-17. He also pointed out that 230,000 km of roads have been constructed so far since the programme was launched in 2000 and his government's aim is to connect the 65,000 villages and habitations still unconnected by roads.

Minister of state for Rural Development Sudarshan Bhagat said in Parliament last week that during 2015-16, his ministry in consultation with Ministry of

Finance has formulated an action plan with enhanced financial allocation to the states and modified funding pattern in the scheme. "Accordingly, the fund sharing pattern of PMGSY has been made in the ratio 60:40 between the Centre and State for all States except for 8 North Eastern and 3 Himalayan States for which it is 90:10. In view of the availability of substantial additional allocation of funds under the Scheme, the Ministry has requested to all the States to submit new proposals as per the programme guidelines for consideration and sanction under PMGSY to substantially achieve the mandate of Scheme by March, 2019."

Updated Date: Mar 04, 2016 10:34 AM

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