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Despite widespread public indignation over corruption in the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS), there is remarkably little rigorous analysis available on this phenomenon. We know very little about the processes through which corruption unfolds, the networks needed to perpetuate fraud, and the loopholes in the implementation chain that enable corruption. MGNREGS has introduced various measures—social audits, electronic muster rolls, smart card payments—to reduce corruption. But have these had an effect?

Before getting into details, some caveats: this dataset is limited to cases highlighted through the social audit and does not represent the universe of corruption in the MGNREGS. Second, the database is still being updated by the social audit society in-charge of undertaking audits in the state.

Now to the data. Of the total cases recorded, attempts to tamper with muster rolls, inflate measurements and ghost works are the most frequent forms of corruption accounting for 35% of fraud unearthed. The field assistant (FA) worksite manager, technical assistant (TA) in-charge of measurement, and branch post master (BPM) who handles wage payments through post office accounts are the most frequently implicated. Thus far, they’ve been held responsible in 50% cases recorded in social audits.

Here is a flavour of what happens. For small amounts—between Rs5,000 and Rs10,000—the FA acts alone. He forges an alliance with a compliant job-card holder and “borrows" the passbook for a price. The job-card holder’s name is then added to the muster roll and the FA pockets the wages.

As the quantum of money to be stolen increases, so do the range of actors. To inflate measurements, the FA has to work together with the TA, and the BPM. First, the FA and the TA collaborate to inflate measurement of the work completed in the measurement book. Since MGNREGS workers are paid on a piece-rate basis, inflated measurements mean inflated wages on the muster roll. Next, the BPM is informed of the extra measurement and when wages are paid, he makes the appropriate entry in the passbook (so the passbook and muster roll add up) and hands over the extra cash to the FA and the TA after, of course, taking a cut for himself.

“Ghost works"—where money is made without opening a worksite—requires the entire network of employment guarantee officers to work in tandem. During fieldwork, we traced one story of how Rs5.53 lakh was stolen through such a fraud.

First, the perpetrators collected an empty muster roll from the Mandal Parishad Development Officer (MPDO) in charge of MGNREGS implementation in the area. To prevent fakes, muster rolls in the state are generated through a centralized management information system, each with a unique identity number. The MPDO is responsible for issuing these rolls and has the final authority for verifying that work is completed and signing off on the rolls for payments.

Next, the panchayat secretary was roped in to provide job-card details for villagers not working on an MGNREGS site. Signatures were forged to create the appearance of work done and the FA and the TA signed off on the fake muster roll. The perpetrators then went back to the MPDO who signed the fake document, authorizing work completion and payment. Finally, the postmaster was influenced so that payments could be withdrawn without individual pass books.

Corruption stories emerging through social audits also offer insights into how the market adjusts to corrective measures. According to Sowmya Kidambi, who heads the social audit society, the audits have served to shift the nature of corruption away from money made by cutting wages, which are easily caught through social audits to alternative harder to catch forms of money making such as inflating measurements and procurement theft.

These new forms of corruption have increased the players involved and introduced a new dynamic in the internal government corruption market. T.R. Raghunandan of, has been tracking this in Karnataka. He finds that panchayat development officers are made to pay anything between Rs500 and Rs3,000 for routine transactions. Often, payments are negotiated when funds are released to panchayat accounts, and, to secure the deal, panchayat officials are made to pay an advance. That a corruption market exists inside the government is not unknown but the pressures on panchayats, which used to get small amounts of money before MGNREGS, is new.

Solutions to the corruption problem need to take into account these new, changing dynamics of the corruption market. The one thread emerging from these preliminary stories is that the corruption market is getting more complex and the range of actors is increasing. Has this altered bureaucratic incentives?

Finally, much of the solutioneering is focused on building tighter processes and more stringent monitoring through technology such as e-musters and biometrics on the one hand and penalizing officials implicated in social audits on the other. Will this serve to curb discretion and further entrench the guideline and rule-based culture that dominates bureaucratic functioning today? More research and analytics are needed to answer these very critical questions.

Yamini Aiyar is director, Accountability Initiative, Centre for Policy Research. Data collected and analysed by Avani Kapur and Anirvan Chowdhury, also from Accountability Initiative, Centre for Policy Research, Delhi.

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Also Read | Uneven spending in MGNREGS

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