As the Modi government deliberates on reframing the norms of the Mahatma Gandhi National Rural Employment Guarantee Act (NREGA) scheme, one the largest job creation programmes in the world, a sharp cut in funding manifests its intentions to squeeze the scheme.

Compared to last financial year, till September, there has been nearly 45 per cent reduction in funds released by the Centre to states for NREGA-the sharpest since the inception of the scheme.

In the financial year 2014-15, the Central government released Rs 13,618 crore to states, against Rs 24,676 crore in the same period last year (FY 2013-14 till September 2013).

Launched in 2005, the NREGA overhauled the labour market by promising 100 days of work a year to each rural household at a pre-determined minimum wage rate. The daily wages under the scheme, as par revision in April 2012, was between Rs 122-189 per day. In addition, the earlier UPA government further increased wages in states like Bihar, Jharkhand, Andhra Pradesh, Mizoram, Nagaland, Sikkim and Tripura. In contrast, the wages for casual labourers across sectors varies between Rs 80-220 per day, with agriculture sector accounting for one of the lowest wages.

State wise allocation of funds in some major states show, in Maharsahtra the fund allocation came down to Rs 136 crore in the FY 14-15, till September, against Rs 1152 crore in the same period last year. In West Bengal, the fund release came down to Rs 1782 crore, against Rs 2214 crore in the same period last year.

In Karnataka the fund allocation came down to 439 crore from Rs 774 crore.

A fund crunch in the district level is apparent. "The fund allocations have substantially reduced under NREGA ever since the new government has come," said a district official in West Bengal.

Higher prevailing wages in NREGA had affected the wages in sectors like real estate and agriculture. According to Pradeep Sureka, a real estate developer based in Kolkata, the average daily wages of casual labourer has increased at the rate of 15-20 per cent annually over the last few years. At present, an unskilled labourer in the real estate sector earns Rs 200 per day, while the wages of semi-skilled or skilled laboueres is between Rs 500-600 per day in West Bengal.

"Getting labourers in the agriculture sector had been very difficult over the last few years, as the wages are much lower than that in the job guarantee scheme," said Pranab Chatterjee, professor at Bidhan Chandra Krishi Viswavidyalaya.

According to the proposals by the Central government, it plans to link the scheme to agriculture linkages. According to a government note, if at least 60 per cent of the works to be taken up in a district in terms of cost shall is for creation of productive assets linked to agriculture and allied activities through development of land, water and trees, it will bring at least Rs 25,000 crore of investment into agriculture. This apart, other changes would lead to deploying of an approximate Rs 8,000 crore for creating infrastructure like minor irrigation structures, according to the note.

The Central government has also been considering an amendment aimed at restricting the NREGA to the country's poorest 200 districts.