STUDY ON EFFECTIVENESS OF NEW MGNREGS WAGE PAYMENT SYSTEM

GS2 POLITY

Overview:

The Aadhaar-Based Payment System (ABPS) was made mandatory for wage payments under MGNREGA from January 1, 2024, aiming to improve efficiency and transparency. However, recent studies have raised concerns about its effectiveness compared to traditional bank account payment methods.

Aadhaar-Based Payment System (ABPS):

ABPS links wage payments directly to workers’ Aadhaar numbers, requiring the linking of Aadhaar with job cards and bank accounts. Initially optional, ABPS became mandatory in 2024 to reduce payment delays and streamline the process.

Study Findings:

• A study analyzing over 3 crore MGNREGA transactions found no significant difference in the timeliness of payments between ABPS (39% processed within 7 days) and traditional bank accounts (36% processed within 7 days).
• Payment rejection rates were similar: 2.1% for ABPS and 2.85% for bank accounts.

Challenges Faced by Workers:

• Workers reported issues like wage misdirection and deletion from the payment system due to mismatches between job card details and Aadhaar.
• The centralised nature of ABPS makes resolving these problems more complex compared to traditional bank methods.

Complexity of the Process:

• The process of linking Aadhaar to job cards and bank accounts is complicated and requires coordination with the National Payments Corporation of India. This complexity can cause delays and confusion among workers.

Government Justification:

• The government claims ABPS ensures faster payments, reduces corruption, and improves transparency. However, the study suggests that payment delays are more often due to inadequate funding rather than issues with the payment system itself.

Future of ABPS and Financial Inclusion:

• ABPS is part of a broader effort to enhance financial inclusion through the Aadhaar Enabled Payment System (AePS), which facilitates basic banking services like deposits, withdrawals, and transfers. The government aims to expand financial access through this system.

Exemptions and Technical Issues:

• The government has allowed exemptions for technical difficulties or Aadhaar-related problems, responding to criticisms that the system may exclude vulnerable populations from essential income support.