Death by a thousand cuts: Why replacing MNREGA with new Rozgar Mission weakens workers’ rights and erodes federalism

MNREGA certainly had deficiencies, but most were administrative and rectifiable. Instead of fixing them, the Centre has chosen to replace the law with a scheme whose structure undermines workers’ rights and destabilises state finances. Five features of the new law illustrate why the cure is worse than the disease.

The first cut lies in the negation of a legal guarantee. Section 5 of the new Act promises up to 125 days of employment. However, Section 22(4) allows the Central government to determine state-wise budgetary allocations. MNREGA was demand-driven and legally enforceable. If work was not provided, the Centre was obligated to pay unemployment allowance. Under the new law, employment depends entirely on budgetary ceilings set by the Centre. This effectively converts a right into a discretionary scheme.

This shift is especially worrying given the Centre’s track record of withholding funds from Opposition-ruled states. Samagra Shiksha Abhiyaan allocations have been delayed for Delhi, Punjab, West Bengal, Kerala and Tamil Nadu. MNREGA funds were blocked for West Bengal, and National Health Mission grants delayed for Punjab. In this context, the Rozgar Mission hollows out the employment guarantee and disproportionately harms workers, most of whom are Dalits, Muslims and women.

The second cut is the mandatory 60-day suspension of employment every year. Section 6(1) prohibits new works and halts ongoing projects for two months annually. The UN Special Rapporteur on Extreme Poverty and Human Rights, along with economists Joseph Stiglitz and Thomas Piketty, have described this provision as structural sabotage of the right to work.

MNREGA wages functioned as a wage floor, compelling private employers and contractors to offer better pay and conditions. The suspension period weakens workers’ bargaining power and exposes them to exploitation precisely when alternative employment is scarce.

The third cut is the financial strangling of states. The new law shifts wage responsibility to states, requiring them to bear 40 per cent of costs. This translates into an additional burden of nearly Rs 55,000 crore nationally. The liability has been imposed without consultation, transition planning or compensation.

For several states, the impact is severe. Uttar Pradesh alone faces an additional burden of over Rs 5,000 crore annually. Bihar, West Bengal and Madhya Pradesh face shocks exceeding Rs 4,000 crore each. To put this in perspective, the entire annual budget of Ayushman Bharat is just over Rs 9,000 crore. This erosion of fiscal space directly affects states’ ability to invest in infrastructure, health and development.

The fourth cut is the entrenchment of coercive federalism. With states dependent on discretionary financial packages to offset their new liabilities, the Centre gains political leverage. Which states will receive relief and on what terms remains unclear. Past experience suggests that welfare concerns in Opposition-ruled states can easily be subordinated to political considerations. This undermines the constitutional balance and reduces states to administrative extensions of the Centre.

The final cut is the manner in which the law was enacted. A two-decade-old statute affecting millions of rural workers was repealed and replaced within three days of parliamentary debate. There was no meaningful consultation with states, experts or workers’ organisations. Such haste reflects disregard for parliamentary scrutiny and public participation in law-making.

As official narratives seek to rebrand this overhaul as progress, it is worth recalling another lesson from Yes Minister. In government, a disaster ceases to be a disaster if it is renamed a “robust realignment of priorities”. In this case, the wreckage has been rechristened the Viksit Bharat Guarantee for Rozgar and Ajeevika Mission (Gramin) Act, 2025.

The writer is a member of the Punjab Development Commission.