Why in news?

The Viksit Bharat-Guarantee for Rozgar and Ajeevika Mission (Gramin) Act, 2025 — popularly known as VB-G RAM G — is set to come into force from July 1, 2026, replacing the two-decade-old Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA).

The Ministry of Rural Development had recently released eight draft rules governing the new scheme's implementation. Public objections and suggestions have been invited within a month, after which the rules will be formally notified.

What’s in Today’s Article?

• What is MGNREGA — Brief Background
• Key Features of VB-G RAM G
• What Happens to Existing MGNREGS Workers?
• The Eight Draft Rules Released
• Key Concerns and Implications

What is MGNREGA — Brief Background

• MGNREGA (enacted 2005) was India's flagship rural employment guarantee scheme — providing 100 days of guaranteed wage employment per year to rural households willing to do unskilled manual work.
• It benefited over five crore rural families in 2025-26 and was entirely Centre-funded for wages.

Key Features of VB-G RAM G

• VB-G RAM G now replaces MGNREGA with significant structural changes.
• Increased Work Days — With a Seasonal Pause
  • The guaranteed employment has been increased from 100 to 125 days per year — a 25% increase in the employment guarantee.
  • However, a 60-day pause during peak agricultural sowing and harvesting seasons has been built in — to ensure adequate availability of farm labour during critical agricultural periods.
• Shift in Funding — States Bear More Burden
  • This is the most significant and controversial change. Under MGNREGA, the Centre bore 100% of the wage bill.
  • Under VB-G RAM G, states must now bear 40% of the funding burden — a major fiscal shift that will strain state exchequers, particularly those with high rural employment demand.
  • The only exceptions are northeastern and Himalayan states and UTs with a legislature (where the Centre bears 90%) and UTs without legislature (where the Centre bears 100%).
• Top-Down Allocation — Centre Determines Devolutions
  • VB-G RAM G reverses the MGNREGA model where Central allocations were based on state-submitted labour budgets (demand-driven).
  • Now, the Centre determines the normative allocation to each state — making the resource allocation process top-down rather than demand-driven.
  • This gives the Centre greater control over fund flows but reduces states' ability to respond to fluctuating local demand.
• 16th Finance Commission Formula for Allocation
  • The Centre will use the Sixteenth Finance Commission's horizontal devolution formula to determine normative allocations to states. This will result in winners and losers among states:
    • States likely to receive lower allocations — Tamil Nadu, Andhra Pradesh, Rajasthan, Maharashtra.
    • States likely to receive higher allocations — Uttar Pradesh, Gujarat, Madhya Pradesh, Assam, Haryana, Punjab, Bihar.
• Performance-Based Withheld Allocation
• A new provision allows the Centre to keep aside a portion of the normative allocation and distribute it among states based on performance parameters — including timely payment of wages, compliance with social audit requirements, percentage of work completion in a financial year, and other Centre-specified indicators.
• The proportion to be withheld has not yet been decided. This provision takes effect from the next financial year.
• States Bear Excess Expenditure
  • If a state's demand for employment exceeds its normative allocation and expenditure goes beyond the Centre's share, the state must bear all additional expenditure — creating a significant fiscal risk for high-demand states.
• DBT Wage Payments
  • All wage and unemployment allowance payments under VB-G RAM G will be made through Direct Benefit Transfer (DBT) into bank or post office accounts — improving transparency and reducing leakages.
  • However, the wage rate under VB-G RAM G is yet to be declared by the Union government.

What Happens to Existing MGNREGS Workers?

• The existing MGNREGS job cards — once renewed and verified through e-KYC — will remain valid for seeking employment under VB-G RAM G.
• This arrangement continues until state governments issue Gramin Rozgar Guarantee Cards under the new law. No worker will be left without access to work during the transition period.

The Eight Draft Rules Released

• The Ministry has released eight draft rules covering all key aspects of the new scheme:
  • National Level Steering Committee Rules
  • Grievance Redressal Rules
  • Administrative Expenses Rules
  • Transitional Provisions under VB-G RAM G Rules
  • Objective Parameters for Normative Allocation Rules
  • Central Gramin Rozgar Guarantee Council Rules
  • Manner of Payment of Wages and Unemployment Allowance Rules
  • Manner and Procedure of Expenditure incurred by States in excess of Normative Allocation Rules
• The Union government has allocated ₹95,692.31 crore for the VB-G RAM G scheme for 2026-27.

Key Concerns and Implications

• For States — The shift of 40% wage burden to states is a major fiscal challenge, particularly for high-demand states like Rajasthan, Andhra Pradesh, and Tamil Nadu — which may also receive lower allocations under the new formula. States with weak fiscal positions may struggle to fund demand surges.
• For Workers — The 25 additional days of guaranteed work is positive. However, the 60-day agricultural pause and the yet-to-be-declared wage rate create uncertainty. The performance-based withheld allocation could also indirectly affect workers if states under-invest in compliance.
• For Centre-State Relations — The shift from demand-driven to top-down allocation and the imposition of performance conditions on fund release represents a significant centralisation of control over a flagship rural welfare programme — raising federalism concerns.