Two BJP-led States question wage burden under VB-G RAM G

Several states — including Bihar, Madhya Pradesh, and Jharkhand — have raised objections to the 60:40 Centre–State funding pattern under the Viksit Bharat – ...

What Happened

Several states — including Bihar, Madhya Pradesh, and Jharkhand — have raised objections to the 60:40 Centre–State funding pattern under the Viksit Bharat – Guarantee for Rozgar and Ajeevika Mission (Gramin) Act, the legislation replacing MGNREGA from July 1, 2026.
At least five states have formally sought a revision of wage rates under the new scheme, while four states have raised concerns about provisions allowing non-working days during agricultural seasons.
Most states in formal consultations flagged outstanding dues under the old MGNREGA framework that remain unpaid, complicating the transition to the new Act.

Static Topic Bridges

Fiscal Federalism and Unfunded Mandates

Fiscal federalism in India refers to the division of fiscal responsibilities — taxing powers, spending obligations, and intergovernmental transfers — between the Centre and states. The Constitution distributes revenue-raising powers primarily to the Centre (Union List entries 82–92) while assigning many expenditure responsibilities to states (State List). The Finance Commission (Article 280) is the primary constitutional mechanism for vertical transfers from the Centre to states, supplemented by grants-in-aid under Article 275.

Article 280: The Finance Commission is constituted every five years to recommend the sharing of central taxes and grants-in-aid to states; the 16th Finance Commission is currently constituted
Centrally Sponsored Schemes (CSS): Programmes where the Centre and states share costs in defined ratios (e.g., 60:40); the state share must be budgeted by state governments
Rationalization of CSS: In 2015-16 the Centre restructured CSS and increased state shares across many schemes simultaneously with devolving a greater tax share per the 14th Finance Commission recommendation (states' share of central taxes raised to 42%)
"Normative allocation" concept in VB-G RAM G: The Centre funds its share up to a normative ceiling; expenditure above that ceiling due to local demand patterns falls entirely on states

Connection to this news: Bihar, Jharkhand, and Madhya Pradesh — states with high rural labour demand and constrained fiscal capacity — face the largest absolute burden from the 60:40 pattern. Bihar's estimated annual co-funding requirement is approximately ₹2,576 crore, equivalent to about 0.23% of its GSDP, at a time when its fiscal deficit already stands above 9% of GSDP.

Wage Determination Under Rural Employment Guarantee Schemes

Under MGNREGA, wage rates are notified annually by the Central Government for each state under Section 6(1) of the Act. These rates are linked to the Consumer Price Index for Agricultural Labourers (CPI-AL) and are distinct from state minimum wages notified under the Minimum Wages Act, 1948. A persistent policy tension has been that MGNREGA wages in several states are lower than state minimum wages, leading to legal challenges on the ground that the right to work at below-minimum wages violates Article 23 (prohibition of forced labour) and Article 21.

Section 6, MGNREGA: Central Government notifies wage rates for each state; not less than ₹120/day was the original floor (now significantly higher after revisions)
Minimum Wages Act, 1948: Empowers both Centre and states to fix minimum wages for scheduled employments
In Sanjit Roy v. State of Rajasthan (1983), the Supreme Court held that paying below minimum wages to persons employed on famine relief works amounts to forced labour under Article 23
Under VB-G RAM G, the wage structure has been redesigned to include Centre-determined normative rates, and states seeking higher wages must fund the differential themselves under the 60:40 cost-sharing model

Connection to this news: States demanding wage revision are seeking upward alignment with their own minimum wage notifications. Under the new funding architecture, any wage above the centrally notified rate would be borne by the state — a financial constraint that effectively gives the Centre indirect control over state wage policy for this scheme.

Agricultural Pause Provision and Workers' Rights

One of the structurally new features in the VB-G RAM G Act is an explicit provision allowing states to declare up to 60 non-working days per year during sowing and harvesting seasons (Sections 6(1) and 6(2)). This was absent in MGNREGA, which operated on the principle that any rural household member demanding work had a legal right to receive it within 15 days.

Under MGNREGA Section 3, the demand-driven right to work was unconditional; work had to be provided within 15 days or an unemployment allowance paid
The unemployment allowance under MGNREGA was: first 30 days — 25% of wage; thereafter — 50% of wage (as per Section 7)
The 60-day agricultural pause under VB-G RAM G is designed to prevent scheme employment from drawing workers away from farm labour during peak seasons, addressing concerns about agricultural labour shortages
States with year-round agricultural activity — such as those with three cropping seasons — would have proportionally shorter effective guarantee periods

Connection to this news: States opposing the non-working day provisions argue that rural workers are most financially vulnerable during the inter-season gap, and suspending guaranteed employment precisely during peak periods defeats the social protection purpose of the scheme.

Pending MGNREGA Dues and Transition Risk

The transition from MGNREGA to VB-G RAM G creates a liability gap: wage payments, material costs, and administrative expenses incurred under the old Act remain due from the Centre but have not been settled in several states. This is a recurring issue — states often front-fund MGNREGA expenditure and seek reimbursement from the Centre, which can delay 6–18 months.

MGNREGA funds flow from the Centre to a dedicated State Employment Guarantee Fund (SEGF) under Section 21 of the Act
Delays in central releases have historically led to states either advancing funds or halting works — both undermine the scheme's social protection objective
As of early 2026, reported pending dues across states in MGNREGA-related administrative wages amounted to significant arrears, with some states reporting dues unsettled since February 2026
The transition to VB-G RAM G from July 1 raises questions about legacy MGNREGA liabilities and which legal framework governs their settlement

Connection to this news: States flagging pending dues are effectively conditioning their cooperation on settlement of existing liabilities before they are asked to assume new co-funding obligations under the replacement Act.

Key Facts & Data

VB-G RAM G replaces MGNREGA from July 1, 2026; passed by Parliament on December 18, 2025
Funding pattern: 60:40 (Centre:State) for general states; 90:10 for North-eastern and Himalayan states
Under MGNREGA, Central Government funded 100% of wages and 75% of material costs; states bore 25% of material costs only
Employment guarantee raised from 100 days (MGNREGA) to 125 days per household per year (VB-G RAM G)
Bihar's estimated annual co-funding liability: approximately ₹2,576 crore (~0.23% of GSDP)
Five states formally sought wage revision at the Rural Development Ministers' consultation (June 28–29, 2026)
Four states raised concerns about the 60-day agricultural pause provision (Sections 6(1) and 6(2))
Agricultural pause provision is new — no equivalent existed in MGNREGA
Sanjit Roy v. State of Rajasthan (1983): SC held paying below minimum wages in public relief works constitutes forced labour under Article 23
Article 280: Finance Commission constituted every five years; 16th Finance Commission currently operational
Finance Commission (14th, 2014): Raised states' share of central taxes from 32% to 42%