Given the implementation scale, the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) became a laboratory for testing many digital technologies. Every aspect of the implementation of the MGNREGS programme, from planning of next year’s works to payment of wages to workers has been digitised. A recently published paper in the Indian Journal of Labour Economics written by the authors of this article and Suguna Bheemarasetti demonstrates how two major digital interventions in MGNREGS have compromised on public values with little or no accountability
The paper was written using a large-scale empirical exercise in conjunction with immersive work on the ground with MGNREGS workers’ organisations and analysis using Right to Information (RTI) responses from the government. The two digital interventions analysed in the paper are ‘segregation of wage payments by caste’ and the ‘Aadhaar-Based Payment Systems (ABPS)’. The analysis is based on 31.36 million (3.13 crore) MGNREGS wage transactions sampled from 327 blocks across 10 states from the financial year (FY) 2021–22. The total amount of wages involved in these transactions is Rs 46.02 billion (Rs 4,602 crores).
The segregation of payments by the caste category of workers has been withdrawn but the Union government has not assumed any responsibility for its impact on delays and on caste or communal tensions it caused at MGNREGS worksites. Until recently, there was a choice between paying wages to workers using the traditional account-based payment system or using the ABPS. Account-based systems are like NEFT payments that use a worker’s name, their account number, and IFSC code. From January 1, 2024, after multiple deadline extensions, the Union government mandated the use of ABPS as the exclusive channel for transferring wage payment in MGNREGS.
In this article, after a brief explanation of what ABPS is, we provide a non-technical exposition of two findings from our research paper. In a nutshell, using principles of statistical science, we find that contrary to government claims, ABPS neither results in quicker payments than the account-based systems, nor does it result in fewer rejections compared to account-based payment systems.
Also read: Making Aadhaar-Based Payments Compulsory for NREGA Wages Is a Recipe for Disaster
MGNREGS payments process and payments through the FY
As per the MGNREGA, states must electronically send their invoices to the Union government within eight days of completion of work. This is called Stage 1. Subsequently, the Union government must transfer wages to the workers as per these invoices within the next seven days. This is called Stage 2 and is entirely the Union government’s responsibility. Stage 1 plus Stage 2 must be completed within 15 days as per the Act. Transfer of wages to workers’s accounts only happens in Stage 2 so we only consider Stage 2 in our paper.
In line with what has been historically observed, the pattern of delays in wage payment is not uniform across the financial year.
Funds dry out as the financial year progresses. In general, one does not observe delays in wage payments in the first quarter (April to June) of the financial year. Delays tend to accumulate onwards from the second quarter (July to September). Sometime around the third quarter, the union government releases some additional funds and delays reduce partially. One observes delays again in the fourth quarter.
This is what is shown in Figure 1. It shows the percentage of transactions processed within seven days and 15 days respectively. Observe that the percentage of transactions completed within seven days in October is less than 40%. It never came close to 100% in any month, which is what it should be as per the Act. Delays in FY 2021-22 show a slightly different pattern as delays were high even in April that year, but decrease in May and June, as is usual. In the ongoing financial year, the government has not released any additional funds.
Figure 1: Percentage of transactions processed within 7 and 15 days over the months in FY 2021-22
What is ABPS and government’s rationale for Aadhaar
Aadhaar has been used for cash transfers through the ABPS. To direct a payment using Aadhaar, a worker’s Aadhaar number must be linked to her job card and bank account. And, the Aadhaar number must be linked correctly through her bank branch with a software mapper of the National Payments Corporation of India, which acts as a clearing house of Aadhaar-based payments. Aadhaar becomes the financial address of the individual and cash transferred by the government gets deposited to the last Aadhaar-linked bank account. This model of sending payments via Aadhaar has been operational from 2016.
Figure 2 shows the rationales over time provided by the union government for using Aadhaar in MGNREGA. These have been compiled using RTI responses and official circulars/press releases.
Figure 2:
In Figure 2, observe the letter provided by the Ministry of Rural Development (MoRD) in October, 2021, which explicitly mentions that “For timely payment of wages it is important to get MGNREGA workers Aadhaar seeded in the MIS. In November, 2023, a letter from the MoRD mentions “Timely wage payments is one of the core areas” and says that the “ABPS is the best alternative” to “avoid rejections.” Similar reasoning was obtained in June, 2023 as well.
However, the Union government provided no evidence for these claims in any of these letters or RTI responses. We set out to investigate these claims using the government’s own data.
Data, Sampling and Findings
There are 10 states in our sample that have high volumes of MGNREGS work. All high volume states have not been selected but our arguments are likely to hold without loss of generality. Within each state, the sampling was done in two stages. First, we randomly sampled one block per district in each of the 10 states and then downloaded all transactions for each sampled block. In FY 2021-22, there was a total of 227.2 million (22.7 crore) wage transactions in our 10 sample states and the sampled transactions were 11.3%, that is 31.37 million (3.13 crores) wage transactions.
As Figure 1 illustrates, the quarter in which a transaction is done is likely to have an impact on the time taken to pay wages. Further, even though Stage 2 is a prerogative of the Union government, there might be variations across states due to administrative preparedness, extent of backwardness and other factors that impact the time taken to process payments. In addition, the number of transactions to be processed can be used as a proxy of the burden of processing payments on government officials, which is likely to have an impact on the overall time taken to process payments. So we use these as input variables in our statistical model and use the percentage of transactions completed within 7 days and 15 days respectively as our output variables.
In our sample, there are 18.94 million (1.89 crore) account-based transactions and 12.41 million (1.24 core) ABPS transactions. Figure 3 shows the percentage of payments processed within seven and 15 days across the two payment types. 36% of account-based payments were processed within seven days compared to 39% of ABPS payments, while 56% of the account-based payments were processed within 15 days compared to 61% of ABPS payments.
Figure 3: Percentage of wage payments processed within 7 days and 15 days for the two payment methods
A statistical test revealed that there is no statistically significant difference between the two modes of payment in transferring wages to workers. Statistical significance is a scientific principle. If there was a statistically significant difference between the two payment methods, then we could infer that one payment method is intrinsically better than the other. But since our statistical test based on a large sample revealed that there is no statistically significant difference, one can infer that the observed difference in the numbers (36% and 39% for wages transferred within seven days) is solely due to chance. What this implies is that ABPS does not inherently result in quicker wage payments compared to account-based systems.
In our sample, 2.85% of the ABPS transactions were rejected and 2.10% of account-based transactions were rejected. Again, a scientific test revealed that there is no statistically significant difference in the rejection rates between the two payment systems suggesting that ABPS does not inherently lead to lower rejection rates than account-based systems.
Conclusions of our paper
In the context of account-based versus ABPS, our paper has three main conclusions.
First, from an empirical standpoint, delays in payment of wages are due to insufficient budget allocation for MGNREGS. The technologies used to transfer wages have no role in reducing delays.
Second, payment rejections can arise using both account-based payments and using ABPS. But contrary to government claims, we find no statistically significant difference in rejection rates across these two payments systems.
Third, our experiences on the ground suggest that rejections arising from account-based systems are easier to resolve and can be done locally at the panchayat or block level but ABPS rejections are harder to resolve owing to its opacity and centralised nature.
Digital technology is a tool for implementation of social policies and cannot be the sole engine. As different problems emerge, the implementers (governments) tend to find technological solutions to them as an easy approach to ‘patch development.’ Such changes may appear simple at the planning level, but introducing these changes on the ground takes time and can be costly. Technological choices have socio-economic consequences and it is unethical to impose techno-solutions without adequately assessing and addressing their pros and cons.
Evidence has indicated that interventions that are designed from the workers’ perspective, with their accessibility at the centre, have led to substantial reductions in payment delays. Rights-holders come from diverse backgrounds, usually take time to adjust to the changes, and some population groups may face severe hardships or even get excluded. Consequently, it is important to have a continuous and consultative process, pilot any intended changes in different areas and population groups, and assess the net benefits and costs. It would be disastrous to let rights be reduced to a technological theme park.
All the authors are associated with LibTech India, a centre within Collaborative Research & Dissemination. Rajendran Narayanan teaches at Azim Premji University, Bangalore. The views expressed are personal.
