MGNREGS Spending Cap Latest News
- The Union Finance Ministry has, for the first time, capped MGNREGS spending at 60% of its annual budget for the first half of FY 2025-26.
- Previously exempt due to its demand-driven nature, the scheme has now been brought under the Monthly/Quarterly Expenditure Plan (MEP/QEP), a spending control mechanism introduced in 2017.
- MEP/QEP is a financial tool used by government ministries and departments to track and manage their spending against allocated budgets.
- It helps in forecasting cash flow, monitoring expenditure, and ensuring that spending aligns with budgetary provisions.
Finance Ministry’s Rationale Behind MGNREGS Spending Cap
- Chronic Budget Overruns
- Historically, over 70% of the MGNREGS budget gets exhausted by September, prompting supplementary allocations in December, which are usually depleted by January.
- Mounting Pending Dues
- In the past five years, year-end pending dues have ranged between ₹15,000 crore and ₹25,000 crore.
- On average, 20% of the next year’s budget goes toward clearing these dues.
- Objective of the Spending Cap
- The Finance Ministry aims to regulate cash flow through the MEP/QEP mechanism to prevent early exhaustion of funds and avoid mid-year supplementary allocations.
- Current Financial Snapshot (FY 2025-26)
- Budget: ₹86,000 crore
- Released so far: 28%
- Pending dues from FY 25: ₹19,200 crore
- Pending dues from FY 26 (as on June 12): ₹3,262 crore
- Nearly 50% of the budget may go toward clearing past dues alone.
Key Issues with MGNREGS Spending Cap
- Fluctuating Rural Work Demand Ignored
- MGNREGS demand varies due to agricultural cycles and weather. Work peaks in April–June and post-Kharif in September.
- However, climate anomalies—like delayed rains or droughts—can increase demand unpredictably.
- Example: In 2023, low rainfall caused a 20% spike in demand in July–August.
- Karnataka spent over 70% of its budget within six months due to severe drought.
- The fixed expenditure cap fails to account for such contingencies, undermining the scheme’s role as a rural safety net.
- Legal Concerns over Statutory Rights
- MGNREGS is not a discretionary welfare scheme; it is backed by law (MGNREG Act, 2005) and guarantees employment as a legal right.
- Unlike schemes such as PM-KISAN, which can be altered by governments, rights-based programmes limit executive discretion.
- Capping expenditure limits the state's ability to honour a legal guarantee of work on demand, violating the core mandate of the Act.
- Constitutional and Judicial Safeguards
- Courts have consistently held that financial constraints cannot be used to justify non-fulfilment of statutory or constitutional obligations.
- Key judgments
- Swaraj Abhiyan v Union of India (2016)
- Municipal Council, Ratlam v Vardhichand (1980)
- Paschim Banga Khet Mazdoor Samity v State of W.B. (1996)
- These rulings reinforce the principle that the government cannot evade its duties—especially in welfare laws—on the grounds of budgetary limitations.
Lack of Clarity and Legal Risks in MGNREGS Spending Cap
- No Clarity Post-Spending Cap
- The government has not specified what will happen once the 60% ceiling is reached. This creates two problematic possibilities:
- States may deny employment despite genuine demand.
- Workers may continue working but face indefinite wage delays.
- Both scenarios risk violating statutory provisions of the MGNREG Act.
- Violation of Legal Entitlements
- The cap risks breaching key rights under the law:
- Section 3: Right to employment within 15 days of demand.
- Schedule II, Para 29: Right to receive wages within 15 days of work completion.
- Ongoing Issues Already Exist
- Wage delays, non-payment of unemployment allowance, and inadequate compensation for delays are already common in MGNREGS.
- The Supreme Court has noted these systemic failures.
- The spending cap may worsen these problems rather than resolve them.
- Undermining the Act’s Purpose
- While aiming to manage fiscal pressure, the Finance Ministry’s move weakens the core intent of the MGNREG Act — to provide timely, legally guaranteed employment and payment during rural distress.
Source: IE | ET
MGNREGS Spending Cap FAQs
Q1: Why did the Centre cap MGNREGS spending?
Ans: To prevent early budget exhaustion and reduce year-end dues by controlling fund release through MEP/QEP limits.
Q2: How does demand fluctuate in MGNREGS?
Ans: Work demand changes seasonally and rises during rural distress, which fixed caps fail to accommodate.
Q3: What legal issue does the spending cap raise?
Ans: It violates the MGNREG Act, which legally guarantees employment and timely payment under statutory obligations.
Q4: How have courts ruled on such obligations?
Ans: Courts have stated financial constraints can’t justify ignoring legal or constitutional duties, citing landmark welfare-related judgments.
Q5: What happens when the spending cap is reached?
Ans: Lack of clarity may lead to work denial or delayed wages, both violating workers’ statutory rights under the Act.
