Payments issue with MGNREGA

  • IASbaba
  • November 9, 2021
  • 0
UPSC Articles
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  • GS-2: Government policies and interventions for development in various sectors
  • GS-3: Indian Economy and issues relating to planning, mobilization, of resources

Payments issue with MGNREGA

Context: Eight crore MGNREGA wage transactions were pending on Diwali.

There are two stages in the wage payment process

  • In Stage 1, States must electronically send invoices, also called FTOs, to the Central government within eight days of completion of work at a worksite. 
  • These invoices contain essential worker details like their names and bank account numbers. 
  • The Central government then processes the invoices and transfers wages directly to the workers’ accounts. This is called Stage 2 and is the Central government’s responsibility that must be completed within seven days after Stage 1.
  • As per the Act, if Stage 1 plus Stage 2 exceeds 15 days, then workers are entitled to a delay compensation for each day’s delay.

Payment issues with MGNREGA

  • Pending arrears of ₹17,543 crore from previous years.
  • Delay compensation for Stage 2 is not even being calculated.
  • Stage 2 was completed only for 29% of the invoices within the mandated seven-day period. 
  • In fact, for nearly two-thirds of the transactions in Jharkhand and more than half the transactions in Chhattisgarh, Madhya Pradesh and West Bengal, Stage 2 exceeded 15 days.
  • There delays in wage payments are a consequence of insufficient funds. Funds allocation this financial year (FY) is 34% lower than the revised budget allocation of last year.
  • Instead of ensuring sufficient funds for timely payments, the Central government has repeatedly altered with the payment architecture. Recently, the Central government issued a circular to segregate invoices based on the caste of workers (SC, ST and others).
    • Central government has justified caste based segregation on grounds that it enables proper accountability of benefits flowing to SC/ST households.
  • There were significant variations in delays by caste. While 46% of payments to SC workers and 37% for ST workers were completed in the mandated seven-day period, it was a dismal 26% for non-SC/ST workers.
  • Caste-based segregation in payments has also resulted in tensions at worksites. It had also resulted in a threefold increase of workload for computer operators at blocks.
  • No difference in the time taken for payments through the Aadhaar Payment Bridge Systems (APBS) and traditional account-based payments. 
  • In fact, APBS has given rise to complicated problems like misdirected payments and payment failures due to wrong Aadhaar mapping with the payment software.


At least ₹50,000 crore needs to be allocated urgently and the Central government, in compliance with Supreme Court orders, must automatically calculate and pay the workers their entitled delay compensation.

Connecting the dots:

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