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RIGHT TO WORK?
were significantly lower than that requested. For instance, the average labor budget was Rs 1,162 million while the average amount received in the first tranche was Rs 188 million. Combined with the funds already available at the district level from the previous year, these disbursements amounted to only 28 percent of the requested labor budget. On paper, the first tranche can be up to 50 percent of the labor budget. However, in 2010/11, the actual amount released was based on the expenditures during the first six months of the previous fiscal year. This amount was released only if all documentation for the previous year was complete; otherwise only a partial amount was released. Districts then had to request release of the remaining amount of the first tranche. Linking the current release to expenditures in the previous year is a problem in a demand-driven scheme such as BREGS, particularly when current circumstances (such as a drought) may result in higher demand than in the previous year. By the end of fiscal year 2010/11, the amount released combined with the amount available from the previous fiscal year came to only about 60 percent on average of the labor budget requested. The main cause for these delays and shortfalls appears to be the limited financial management capacity at the district and lower levels. For instance, the above data indicate that shortfalls in the amounts released varied substantially across districts, ranging from 18 percent of the labor budget in Madhubani to 91 percent in Muzaffarpur. This variance likely reflects the differences in capacity across districts, blocks, and GPs for managing funds and preparing accurate reports on use. Delays in the submission of accurate documentation by any one GP can delay the entire district’s receipt of funds. In addition to the problems of insufficient and untimely funds availability, Bihar has often been unable to fully absorb available resources (central and state) in the past. This was the case when BREGS was first introduced. In 2006/07, expenditure as a share of total available funds was only 38 percent. Utilization rates have improved significantly since then; in 2010/11, about 82 percent of available resources were spent. This improvement occurred even as the total quantum of resources increased more than 2.5 times. However, expenditures on the scheme can be expected to increase even further as the delivery system becomes more responsive to the currently unmet demand. In the future, addressing the varying capacities of districts to absorb available funds will be critical. As figure 8.3 indicates, not only do utilization rates vary across districts, they also vary from year to year within districts.