Unspent Balances and Flow of Funds Mechanism Under Mahatma Gandhi Rural Employment Guarantee Scheme (MGNREGS)

Unspent Balances and Flow of Funds Mechanism Under Some Rural Development Schemes (PMGSY, NSAP, IAY and NRLM)

NIPFP, New Delhi

ObjectivesIdentifying and analyzing reasons for huge opening balances in different states with the help of state specific factors.Examining the trends of unspent expenditures at the district level and across the time. Examining the flow of fund from Centre to State and State to DistrictTo look at the inter-state comparison in the fund utilization patternBased on the trends as well as discussions, a set of policy suggestions would be made to address the issue of unspent balances

MethodologySelected at least two states each for high and low OB in MGNREGS based on 2011-12 information is considered. The four states selected for any scheme will be studied in depth for that scheme and other schemes also will be studied in those states if they have high or low balances. In this presentation, issues related to unspent balances under PMGSY, IAY, NRLM and NSAP programs will be discussedAnalysis is done by collecting information about the cash flows at various levels of governments and for the last three years from MoRD. Analysis is done based on detailed field visits to 8 selected states The study undertakes discussions at District, block and Gram Panchayat level to understand the issues related OB.After collecting information at the state level, a district of high/low opening balance from each state is selected for on-field observations at District , Block and GP level.

PMGSY Program: A BackgroundPMGSYLaunched on 25th December 2000 by the GoI. It is a biggest ever infrastructure development project of India funded by MoRD.Funds are arranged by levying Cess on sale of Diesel and Petrol.Aims to:provide all-weather connectivity to all habitations having population of 500 + in plain areas and 250+ in Hill States, Tribal (Schedule V), Desert (DDP) and backward areas identified by Planning Commission.to upgrade eligible existing roads to ensure better connectivity. A Block Level Master Plan for the Core Network will be prepared by making best use of existing and proposed road facilities. At district level also District Rural Road Plan and the Core Network will be preparedDistrict Panchayat will discuss the Plan with the MP and MLAs as per the guidelines of the programme.Once approved by the District Panchayat, the plan will be sent to the State-level Agency (SRRDA) as well as NRRDA at the Centre.

Fund Flow Mechanism under PMGSYThe Ministry releases funds to the States in two installments;

The first installment in a particular year amounting to 50 % of the value of the projects cleared by the Ministry or total allocation of the State, whichever is lower, to be released after the projects have been cleared by the Ministry. This is subject to fulfillment of conditions, if any, stipulated earlier.the second installment would be released subject to the utilisation of 60 % of the available funds and completion of at least 80 % of the road works awarded in the year previous to the funds and 100 % of the awarded works of all the years preceding as well as submition of utilisation certifcates, and completion of physical work etc..Fund Release and Unspent Balances (in crore Rs)Decline in release in successive yearsAlthough utililsation level has improved, negative unspent balance in 2014However, trends at state level shows some mixed pictureYearOpening BalancesCentral ReleaseTotal Available fundsTotal expenditureUnspent BalanceUtilization Level2010-11-11212018119060149114149782011-1241491568519834109468888552012-13888842631315183874764642013-1447644958972213095-3373135Amount and Share of unspent balance under IAP & Hilly StatesYearTotal CB under PMGSYIAP States CBHilly States CB(IAP + Hilly) States CB IAP CB/Total Hilly States CB/Total(IAP + Hilly) CB/Total2010-11414928952253121705752011-12888864108067217729812012-1347652700127439745727832013-14-3372-2926-148-307587491S. No.StateUtilization (Expenditure as % of Sanctioned Amount) till March20112012201320141Andhra Pradesh49.0950.1549.5849.152Bihar24.5231.8945.5851.033Chhattisgarh39.5741.1144.6262.974Jharkhand48.7850.3051.9052.055Madhya Pradesh46.9049.0949.7450.596Maharashtra41.7444.4843.6246.397Odisha45.6048.1449.5250.488Uttar Pradesh44.5646.9847.3744.969West Bengal35.5236.4037.6134.37Grand Total43.4645.7947.9152.89Financial Progress of IAP Districts Phase-wise number of pending work up to phase VIIIStatesPhase IPhase IIPhase IIIPhase IVPhase VPhase VIPhase VIIPhase VIIITotalAndhra Pradesh010041342951Assam03002468323373791Bihar17751310428929111651585Karnataka0000036312Meghalaya02131521Odisha2015173968197308646Rajasthan003017597692Uttar Pradesh87012013511345519479Total1101252082164101127156837197483Expenditure per Km (in Lacs)States2010-112011-122012-132013-14Andhra Pradesh22315179Assam63623673Bihar107383158Karnataka341444Meghalaya4462141157Odisha39395052Rajasthan23552731Uttar Pradesh24373674India33353552Reasons for Unspent Balances Delay in completion of road works in IAP districts due to left wing extremism and poor contracting capacityCost EscalationCourt litigations and non-clearance from the forest departmentLong rainy season in hilly areasPending works from the very early phases

Fund flow mechanism: Issues Delay in second instalment release from center to states (especially in case of Bihar) mainly due to delay in reporting and in some instance non-adherence to guidelinesNon-mantenance of The Online Management, Monitoring and Accounting system (OMMAS). Release of funds without proper execution of plan to some states during 2011-12 . Example: Andhra Pradesh had sufficient funds to execute the sanctioned road work. It had not demanded funds from GoI during 2012-13. However, the State had Rs. 414.17 crore as unspent balances by 31st March 2013. The State officials have explained the reasons for such huge unspent balances is the excess fund release of amount Rs. 607.48 crore from the GoI during 2011-12. The State could not utilize the funds in the short time available with themConclusion and Policy Recommendation 1. The release of funds to the SRRDA must be based on annual allocation in consultation with State/UT governments and should be based on the following

Phase-wise status of physical and financial progressPhase-wise monthly progress of the cleared projectsPhase-wise monthly expenditure plan linked with the cleared projectsNumber of road works, length and value of projects likely to be sanctioned during the financial year.2. The Online Management, Monitoring and Accounting system (OMMAS) may be maintained strictly and States may be asked to update the progress of PMGSY on monthly basis.NSAP started on 15th August 1995.It aims to provide social assistance, to poor households in case of old age, widows, disability, death of the breadwinner, and maternity.100% Central Assistance to ensure social protection to beneficiaries everywhere in the country uniformly.1995: First to introduce Old Age Pension to provide Rs. 75 per month to destitute above 65 years2002-03: Transferred to Additional Central Assistance (ACA)2006: Increased pension amount from Rs. 75 to Rs. 200 and Expanded coverage from destitute to all BPL in 2007.2011:Expanded OAP coverage from 65+ year to 60+ year; lowered widows and disabled to upto 59 years; Increased pension amount from Rs. 200 to Rs. 500 for 80+ Year . Budget estimate for NSAP pension scheme are based on targets set by GoI which is based on poverty estimates, census figure and the age limits delineated for the particular scheme.Budgeting is done separately for general and special (SC/ST) categories.

NSAP ProgrammeComponents of NSAPIndira Gandhi National Old Age Pension Scheme (IGNOAPS) Indira Gandhi National Widow Pension Scheme (IGNWPS) Indira Gandhi National Disability Pension Scheme (IGNDPS) National Family Benefit Scheme (NFBS) Annapurna Scheme IAY ProgrammesProvision of grants or assistance to BPL Households for construction or up gradation of their dwelling. Gram Sabha in some states and A committee with representation of elected members select beneficiaries. Funds are released to Panchayat raj institutions based on the targets fixed .The assistance is given in two or three parts depending on stages of construction.The responsibility of construction of dwelling is on the beneficiary where as supervision and paper work is done by the GPs. Funds are disbursed in the form a cheque in favor of beneficiary directly by the block panchayat on certification of completion by the GP

Transition from SGSY to NRLMShift from present allocation based strategy to a demand driven strategy, enabling the States to formulate their own livelihood-based poverty reduction action plansFocus on targets, outcomes and time bound strategyContinuous capacity building, imparting requisite skills and creating linkages with livelihoods opportunities for the poorAajeevika, an another dimension of NRLM, supports phased implementation approach and intensive block strategy to run the program In Aajeevika, intensive block is to be identified by the SLRM for benefit of poor, targeting the poorest of poor. It is provided with means enhancement of livelihoods by creating strong institutional platform of the poor in 3 yearsOnce intensive work is completed in selected block, it provides social capital to replicate Aajeevika in other block in systematic mannerFinancing of the Aajeevika program is shared between the center and the states in the ratio of 75:25.

NRLM Program