Print edition : June 14, 2013

Women working under MGNREGS project at Jagannath Prasad village in Ganjam district of Odisha. A file photograph. Photo: PTI

A mob of sarpanches protesting in Jaipur in September 2010 against social audits of MGNREGS works. Photo: Rohit Jain Paras

THE Mahatma Gandhi National Rural Employment Scheme (MGNREGS), initiated by the first United Progressive Alliance (UPA) government, has come under a cloud following a performance audit conducted by the office of the Comptroller and Auditor General (CAG) of India. The scheme, touted as the flagship programme of the government, is aimed at guaranteeing at least 100 days of wage employment a year for the rural poor. But serious operational, monitoring and functional flaws have been found in the scheme, with the onus being on the Central government. Most importantly, it is the reduction in the number of person days of employment that should have the Central government worried, especially if its flagship programme is meant to address the most vulnerable sections of the rural poor. The CAG, to that extent, has been justifiably critical in its assessment.

This assessment was made in the second performance audit of the scheme. The first one was undertaken in 2007-08, and the period covered was from February 2006 to March 2007. In fact, the Ministry of Rural Development, the nodal Ministry for the scheme, requested the CAG to undertake an audit for the period between April 2007 and March 2012. The CAG’ s office looked at the implementation of the scheme in 132 districts, 458 blocks within selected districts, and 3,848 gram panchayats in selected blocks of 28 States and Union Territories. The scheme, which was initially launched in 200 districts from February 2, 2006, was expanded to cover all rural districts by April 1, 2008.

What is interesting is that many of the issues raised by the CAG in its earlier audit report seem to have persisted, such as delayed wage payments, job card frauds and non-appointment of staff such as gram rozgar sevaks at the gram panchayat and block levels.

Declining expenditure

Contrary to the perception that the Central expenditure had gone up, the CAG report shows that over the last three years, the average expenditure per district had declined (almost to the 2007-08 levels), the average wage cost per person day had marginally risen, while the person days of employment generated for every rural household had declined substantively. Even though the average wage cost or wages paid had gone up, the benefits were negated by the decline in employment provided per household. More seriously, the combined share of the Scheduled Castes, the Scheduled Tribes and women was less than 50 per cent. The decline is very obvious in the case of the S.Cs and the S.Ts, the share of the latter having declined from 29 per cent in 2007-08 to 19 per cent in 2011-12. Besides, while the number of works taken up increased steadily, the number of works completed declined by 28 per cent in 2011-12 as compared with the previous year. But more significantly, the share of completed works comprised only 22.5 per cent of the total works undertaken in 2011-12.

More importantly, it is the decline in the number of person days of employment and the non-adherence to the statutory 60:40 wage-material ratio that may well have contributed significantly to the decline in employment per household. The Ministry of Rural Development contravened the Act by relaxing this ratio through an operational guideline which stated that this ratio was to be maintained “preferably at the gram panchayat, block and district levels”. The CAG’s findings in 12 States and one Union Territory confirmed that the non-adherence to this ratio led to a shortfall in the generation of 15.03 crore person days during the audit period.

As the scheme is labour-intensive and designed to generate employment, the material component of the work was not to have exceeded 40 per cent of the total cost. This norm was violated in at least 12 States and one Union Territory, where such costs exceeded the prescribed level by Rs.1,594.37 crore in the cases checked by the CAG team, thereby reducing the wage component of the expenditure. “The Ministry may monitor the maintenance of the prescribed wage-material ratio strictly,” recommends the CAG audit, also asking State governments to “make good the amounts spent in excess of 60:40 ratio”. Clearly, had the sample been larger, maybe the figure would have been higher.

The CAG scathingly notes: “The decline in per household employment generation and in the completion of works indicates a disturbing trend in achieving the primary objective of the scheme, i.e, providing livelihood security and creation of assets.” The CAG has refused to buy the Ministry’s argument that the shortfall in employment generation was because of rain and also the other employment opportunities in rural areas. It has said that as the monsoon was a regular phenomenon, plans needed to be prepared accordingly. In fact in some States, the shortfall in actual employment generation as against planned employment ranged from 30 to 100 per cent. In Bihar, it was between 27 to 98 per cent.

Job card irregularities

For a demand-driven scheme, job cards were not issued to 12,455 households in six States; in seven States, job cards were found not pasted with photographs, and underpayment of wages amounting to Rs.36.97 crore was noticed in 14 States. There were multiple cases of delayed payment of wages too, for which no compensation was paid. Further, inadmissible works amounting to Rs.2,252.43 crore were undertaken, which included construction of earthen roads, kutcha roads and cement concrete roads and construction of raised platforms for cattle and bathing ghats.

Further, the CAG’s findings to an extent complement an anthology of research studies on the implementation of the Act for the period 2006-12, commissioned by the Ministry of Rural Development and published late last year. But the decline in employment affecting vulnerable segments of the population does not reflect in the evaluation of the studies made in the Ministry’s internal assessment. On the whole, the CAG report and the Ministry’s internal analysis only indicate that there is an urgent need to plug the leakages and implement the Act strictly.

Terming as unsatisfactory the monitoring at the Central level despite the existence of a Central Employment Guarantee Council for the past six years, the CAG report notes that “the only monitoring activity was carried out in the form of 13 ad hoc field visits to six States by the Council members. No follow-up action was taken on these visits by the Council.” For a government increasingly obsessed with technology and the delivery mechanism, both seen as a panacea for all the ills of the country, the CAG’s finding that there were differences between the data uploaded in the management information system (MIS) and actual records available with the district programme coordinator shows that technology is amenable to tampering.

The CAG found that not only were erroneous entries made at the database stage itself, but there were several instances where data were not entered on a regular basis. The MIS data on the physical and financial performance of the scheme are not reliable, the report says. Faulty programming logic, missing validation controls, and data manipulation without any reference to basic records were also noticed by the CAG. Again, an abysmal shortage of staff at all levels had adversely affected the implementation of the scheme. Fixing responsibility on the Ministry for this, the CAG has said that “the staff position should have been closely monitored by the Ministry and shortfall on this account be taken up by the State governments”.

There had been a significant decline in employment generation per rural household over the last two years, from 54 days in 2009-10 to 43 days in 2011-12, and a substantive decline in the proportion of works completed in 2011-12. Bihar, Maharashtra and Uttar Pradesh, which together accounted for 46 per cent of the rural poor, utilised only 20 per cent of the scheme funds. Questions are being asked about the sanctioned money that is unaccounted for and the Central government’s allegedly wilful failure to monitor it.

Excess funds

The CAG has accused the Ministry of relaxing conditions and releasing Rs.1,960.45 crore in March 2011 to States, contravening norms of financial accountability; also Rs.4,072.99 crore was released by the Ministry between 2008 and 2012 to States, in contravention of budgetary provisions and general financial rules. Why was the government in a hurry to release funds contravening budgetary provisions? Similarly, excess funds were released by the Ministry to six States either owing to “wrong calculation or without taking note of the balance available with the States”. The Operational Guidelines clearly stated that the release of Central funds under the scheme was to be based on the States’ proposals rather than predetermined allocations. “The action of the Ministry to release funds in excess of the States’ proposals by 10 per cent, without ensuring utilisation of the previous tranche and checking on past performance, seemed inappropriate,” notes the CAG. Interestingly, the excess funds were released in the case of all non-Congress-ruled States —Gujarat, Madhya Pradesh, Odisha and Uttar Pradesh. “The release of the Central funds without parliamentary approval rendered the release unauthorised…. Parliamentary approvals are meant for a specific year and do not allow carry forward of unspent balances to subsequent years,” notes the CAG.

In Haryana, where the minimum wages were higher than the MNREGS wage, the Central government stepped in to pay the difference when the cost should have been borne by the State exchequer.

Some sections have speculated that the CAG was deliberately asked to do the study in order to whittle down the scheme or to show some State governments in a poor light. The report has raised the question whether the scheme had ameliorated poverty levels to any extent. This has also raised questions regarding the success of the entire scheme and the propaganda by the government to make it into one of its major electoral planks in the coming State Assembly elections this year and parliamentary elections next year. Notwithstanding the drawbacks in implementation, siphoning of funds and poor monitoring, the scheme has been much in demand even in States with a relatively high per capita income, such as Haryana, where the success of its implementation in a few districts has come about mainly owing to organised action by agricultural workers and committed bureaucrats.

The lowest tier of democracy, the gram panchayats, authorised to prepare annual development plans on the recommendations of the gram sabha in 11 States and one Union Territory, did not deliver on that front. The report’s most hard-hitting observation, however, is that 129.22 lakh works, amounting to Rs.1,26,961.11 crore, were approved in the annual plans, but only 30 per cent of the planned works, amounting to Rs.27,792.13 crore, were completed during the audit period. While the CAG attributes this to inefficiency in implementation, it does not indicate where the rest of the sanctioned amount has gone. The incorrectness and non-maintenance of basic records were noticed in 18 to 54 per cent of all the test-checked gram panchayats, and this restricted the process of proper verification.

It is seven years since an Act was passed to implement the scheme. Yet at least four States, including two Congress-ruled ones, had not even formulated the rules as of March 2012. Efforts to publicise the scheme in order to generate demand for employment under it were also inadequate.

In 12 States, Information, Education and Communication plans were not even designed and IEC funds were not used. “The low level of IEC activities would have an adverse effect on the awareness levels of the beneficiaries and would, in turn, hamper the beneficiaries from fully realising their rights,” observes the CAG report.

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