Context:

A recent study published in the Indian Journal of Labour Economics analysed the effectiveness of the Aadhaar-based payment system (ABPS) for MGNREGA wage payments.

• The study focused on 3.14 crore transactions worth ₹4,602 crore across 10 states during the 2021-22 period.
• ABPS became mandatory for MGNREGA wage payments starting in January 2024.

Key Findings:

1.   Minimal Differences in Payment Speed: ABPS processed 39% of payments within 7 days, compared to 36% for account-based payments.

2.   Payment Rejection Rates: 2.1% of ABPS payments were rejected, while 2.85% of account-based payments faced rejection.

o    These differences were statistically insignificant, suggesting no major improvement in efficiency.

3.   Complications of the Aadhaar-Based System: The ABPS requires workers’ Aadhaar numbers to be linked to both their job cards and bank accounts, with correct mapping through the National Payments Corporation of India (NPCI).

o    This complex process can cause issues like mismatches or misdirected payments.

o    The centralised nature of ABPS makes it harder for workers to resolve these issues locally.

What is MGNREGA?

• Mahatma Gandhi National Rural Employment Guarantee Act, (MGNREGA), passed in 2005, is a law that guarantees the “right to work” for rural citizens in India.
• It ensures that rural households can access employment through public work-related unskilled labour, with a focus on improving economic conditions in rural areas.

Key Provisions of MGNREGA:

1.   Eligibility Criteria:

o    Must be a citizen of India.

o    At least 18 years old.

o    Belong to a rural household.

o    Willing to perform unskilled labor.

2.   Guaranteed Employment: MGNREGA guarantees 100 days of unskilled employment to all eligible rural citizens at the government-set minimum wage.

3.   Unemployment Allowance:

o    If work is not provided within 15 days of application, an unemployment allowance is provided.

o    The allowance is 1/4th of the minimum wage for the first 30 days, and 1/2 for the following period.

4.   Social Audit: Section 17 of MGNREGA mandates a social audit of all works undertaken under the program, promoting transparency and accountability.

5.   Preference for Local Employment: Work is provided within a 5 km radius of the applicant’s village, and travel allowances are given if the work is farther.

6.   Decentralized Planning: Panchayati Raj Institutions (PRIs) play a key role in planning, executing, and monitoring works, with Gram Sabhas allowed to suggest work and carry out at least half of the tasks.