Centre's Funding Shift for National Rural Employment Guarantee Scheme Sparks State Opposition
No state likes it when the Centre asks it to share a burden it never did in the past. More so in these times, when political parties have, in a race to the bottom, made fiscally unsustainable promises to win Assembly elections. Naturally then, states, particularly those ruled by the Opposition, threw a fit after the Centre suddenly changed the rules of the game and asked them this year to partly provide for the big-ticket National Rural Employment Guarantee Scheme. For 20 long years, all states were happy when it was fully funded by the Centre — in the first 10 years by the UPA government after it launched the scheme in 2006, and later by the NDA government. Under the scheme, now rechristened as Viksit Bharat – Guarantee for Rozgar and Ajeevika Mission (Gramin) or VB-G RAM-G, if a state requires Rs 100 crore in a year, the Centre will give Rs 60 crore from the Union Budget, and the state will give Rs 40 crore from the state Budget. For Himalayan and Northeastern states, the Centre-state split is 90:10; for Union Territories without legislatures, the Centre will fully fund the scheme. Earlier, the Centre provided the entire amount of wages for all states. It is not just the Opposition, but also those where the BJP is in power, which feel the fiscal stress of the change in rules. They, too, complain, but in private, because the resource kitty is limited, significant expenditure remains sticky and inflexible, and they, too, have to make tough choices on how and where to spend the scarce revenues they earn. The opposition to the Centre’s move is not just political, but social, economic and fiscal too. Political, understandably, because this was a flagship scheme introduced by the Congress but never seen as transformative by the BJP. Social, since it offered livelihood and a minimum income security to poor farmers and labourers who could not get any other job. Economic, because the NREGA wage acted like a floor, and NREGA job card holders leveraged it to deny work offers with wages lower than this. Fiscal, because states are perpetually strapped for cash. While the Finance Ministers of BJP states have little choice but to toe the national party line, those of Opposition states — Karnataka, Kerala, Telangana, Punjab, Tamil Nadu and Jharkhand — spoke out. In Budget speech after speech, they condemned the Centre for requiring them to take care of 40% expenditure. Some wanted the Centre to uphold the principles of decentralised governance and rights of rural workers, others demanded restoration of 100% funding, and yet others threatened legal recourse. In his March 20 Budget speech, Telangana Finance Minister Bhatti Vikramarka Mallu said: “This is not just a scheme; it is an ‘employment right’ provided to the common person. Over the past two decades, this scheme has brought about a silent revolution in villages.” Then Karnataka CM Siddaramaiah, who also held the Finance portfolio, was more frontal in his attack. “Our Government remains committed to pursuing all appropriate recourse, including legal measures, to safeguard the rights of rural workers and uphold the principles of decentralised governance,” he said in his March 6 Budget speech. Every other Opposition state i.e., Tamil Nadu, Himachal Pradesh, Jharkhand, Punjab and Kerala, said the rule change is not right, and hurts rural worker’s interests. All this makes for good optics in the political theatre. But despite the restrictions and new funding pattern, Opposition states have embraced realpolitik, and for good reasons. This shows in their budget allocation for VB-G RAM-G scheme in this financial year. In his Budget speech on August 5, Tamil Nadu Finance Minister N Marie Wilson said the state has made an “unprecedented” contribution of Rs 5,057 crore. This translates to exactly 40% of the total VB-G RAM-G budget of Rs 12,642 crore for the state in 2026-27. Three other states provided 40% of their share: Karnataka Rs 3,806.61 crore (40% of Rs 9,516 crore), Telangana Rs 2,550.21 crore (40% of Rs 6,375 crore) and Jharkhand Rs 1,853 crore (40% of Rs 4,558 crore). Tamil Nadu, in fact, went a step ahead and said it will provide 150 days employment (25 days more than the VB-G RAM-G scheme) by bearing an extra expenditure of Rs 100 crore. Kerala Chief Minister VD Satheesan said he has allocated Rs 1,422 crore; this is just 27% of the Rs 5,226 crore VB-G RAM-G total estimated budget for the state) in the first phase, Punjab Rs 608 crore (27% of Rs 2,218 crore total estimated budget), and Himachal Rs 50.94 crore (4% of Rs 1,337 crore as against the required 10%). It is pretty certain states will provide fully for it during the course of the year. Given such strident opposition, why would all states do it? One, they have little choice. But more importantly, it is true the scheme has transformed the way the rural economy works, providing not just employment security, but wage security too. Nobody quite bothers about the Minimum Wages Act. But for this scheme, rural wages in states will collapse. States are, at the end of the day, putting their money where their mouth is.
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