States have vehemently opposed the proposed changes in MNREGA, and called for more fiscal space during a pre-budget consultation chaired by Union Finance Minister Nirmala Sitharaman on Saturday.
Many states have expressed strong reservations regarding the replacement of the demand-driven MGNREGA with the new Viksit Bharat Guarantee for Rozgar and Ajivika Mission (Gramin) (VB-G RAM G. Some states also raised the issue of revenue loss due to GST rationalization.
Punjab Finance Minister Harpal Singh Cheema expressed strong opposition to the proposed changes to the MGNREGA framework, arguing that the new model dilutes the employment guarantee and transfers a significant financial burden to states.
He called for the restoration of the original demand-driven structure and funding pattern of the scheme. Proposed MGNREGA changes weaken employment guarantee, burden states, Cheema said at the pre-Budget meeting. Telangana Finance Minister Mallu Bhatti Vikramarka said the Union government, without consulting states, has replaced the MGNREGA with the VB G RAM G scheme.
In the new Act, the scheme has been made from 90:10 to 60:40, thus imposing further burden on already strained resources of the states. Also, any additional man-days, which are above the normative allocation, will be the responsibility of the states. This will create a serious obstacle in providing demand-based work to job seekers, he said.
"This is entirely against the spirit of cooperative federalism and starving them of funds for capital outlay, which is essential for maintaining growth momentum," Vikramarka said.
The meeting was attended by the Minister of State for Finance, several Chief Ministers, and Finance Ministers from across the country. While the Union Government highlighted that over ₹4.25 lakh crore in 50-year interest-free loans have been released to states since 2020-21 under the Scheme for Special Assistance to States for Capital Investment (SASCI), individual states presented a more precarious financial picture.
Kerala Finance Minister K N Balagopal submitted a detailed proposal seeking a Special Fiscal Correction Package to bridge a resource gap exceeding ₹21,000 crore. Balagopal noted a ₹17,000 crore cut in the state’s borrowing limit, which he claimed undermines vital capital expenditure and social welfare.
Karnataka’s Revenue Minister, Krishna Byre Gowda, highlighted that despite being a major growth contributor, the state is under "mounting pressure". He said that following GST rate rationalization, Karnataka’s GST growth plummeted from 12% to 5%, leading to a projected ₹9,000 crore annual shortfall.