Incorporating major changes in UPA government's flagship scheme, Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) quietly, the NDA government has converted it to an asset-driven programme rather than just generating jobs, which according to the officials in rural development ministry is going to affect 5 crore rural households across the country.

The ministry in consultation with the Prime Minister's Office (PMO) has incorporated significant changes that included tweaking labour-material ratio and also planning to restrict it to only backward districts. But what has left the state governments worried of late is that they are not even receiving the requisite funds to sustain the programme. They believe that rationing of funds and also non-reimbursement of their liabilities to the tune of Rs59,1578 crore, is hitting the scheme.

In a letter written to the rural development ministry recently, the commissioner of MGNREGA in Bihar, Mihir Kumar Singh, has raised an alarm that his state was facing an acute shortage of funds to meet targets as well as to clear off Rs500 crore liabilities for 2013-14. In reply to an RTI application, the ministry of rural development has admitted that they have received Rs13,833.33 crore, which is less than the funds requirement in the states.

According to minutes of a meeting held on August 4, the rural development ministry finalised a decision to change labour-material ratio from 60:40 to 51:49. An internal note on this significant change was circulated within the government on July 21. This means that henceforth, only 51% funds meant for MGNREGA will be spent on employment, while the rest will be spent on purchasing material. Earlier only 40% funds were meant for purchasing material, which has now been increased to 49%. Sources say changes were necessitated due to ground reports that the programme was unable to create assets in villages due to lack of material and also it had affected agriculture activities in various regions, as labourers were demanding high wages.

But the activists and experts claim the tweaking of this clause will affect 5 crore households and will results in fall of 40% employment generation.

Abhijit Sen, former member of Planning Commission and one of the architects of this law, said the Act was intended to help rural workers to overcome conditions of acute distress rather just building assets. He expressed concern that budgetary allocations on this programme have been steadily falling and this year the allocation is significantly less than last year.

But the minutes of the meeting held in the rural ministry state that the MNREGA works across the country were using just 27% component on purchasing material to engage in some concrete works, despite 40% permissible limits. The minutes do record dissent of some officials, who said the increasing of material component to 49% will help building properties and resources, but at the same time the amount available for unskilled wages would come down sharply.

"This could result in the total employment coming down to 136 crore person days. Such a sharp fall in person days is bound to create difficulties in the rural areas. The situation could get more complicated in a drought year and 5 crore households will be adversely affected by this decision," says a dissent note incorporated in the minutes of the meeting, accessed by the dna.

It further says, the material intensive woks demand a high order of organisational skills brought only in by the contractors, resulting in corruption and their ultimate deterioration.

Another suggestion in the meeting, as the minutes have noted, is to target the programme in specific areas rather in whole country. "In states like Punjab, Haryana, Maharashtra, Gujarat, Tamil Nadu, Kerala etc, the Act does not seem necessary barring a few areas which are rally backward," said the minutes. It suggests the law needs to be amended through parliament to enable its coverage only in backward districts, as was incorporated in the original law passed by the parliament in 2005, which was applicable only in selected districts.

Aruna Roy, an RTI activist and formerly member of National Adivsory Council NAC that drafted the MGNREGA said the government's move to reduce programme to one-third of the blocks, will only kill it and reduce it to a complete manipulable device. "With so many people depending on the MGNREGA, announcement of Union rural development minister Nitin Gadkari to restrict it to tribal and backward districts has come as a death warrant for the Act," she said.