From North to South, how revisions in MGNREGS will burden states

Earlier this week, the government proposed major changes to the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS) through the introduction of a new bill in the Lok Sabha. The Viksit Bharat-Guarantee for Rozgar and Ajeevika Mission (Gramin) (VB-G RAM G) Bill, 2025, proposes to increase the employment guarantee under the rural employment guarantee scheme. In 2025-26, the central government allocated ₹86,000 crore to MGNREGS, one of the biggest expenditure items in its budget.

The new rules will reduce the scheme’s availability. They will also dramatically alter its funding pattern, increasing the burden on states and giving the Centre more discretion in allocations.Under current MGNREGS norms, the Centre bears the full cost of unskilled wages paid under the scheme and 75% of raw material cost. Over the last two fiscal years and the ongoing fiscal year, wage costs have accounted for around 66% of scheme expenditure and raw materials a further 31%.

Assuming the central government paid 75% of raw material costs, this implies it is currently bearing about 90% of the overall scheme expenditure and states the remaining 10%.Under the revised norms, the total cost of the scheme in any given year will be shared between the Centre and states in a 60:40 ratio, causing the burden on states to rise threefold. Two other clauses have cost implications for states. One, if states are unable to provide employment to a worker within 15 days of asking, they are liable to pay unemployment benefits.