Official sources said the Government has not only disbursed Rs 12,000 crore allotted for the scheme in 2007-08 to the states but, the Rural Development Ministry which administers it, has also spent more than Rs 300 crore over and above this from the savings it had from other schemes.

The ministry may have to seek over Rs 300 crore more in the third supplementary demands for 2007-08 to continue the scheme for the remaining days of March, which also happens to be one of the peak seasons for employment demand under the scheme.

Incidentally, as reported by The Indian Express, the Mayawati Government has shot off three letters to the Centre demanding money to carry forward the NREGS in Uttar Pradesh, warning that they were running short of money to pay job card holders.

The Government may end up spending about Rs 13,000 crore during 2007-08, as against Rs 12,000 crore allotted for the scheme. This is in contrast to the expenditure of about Rs 8,000 crore as against Rs 11,300 crore provided for the scheme in its first year, 2006-07.

The jump in expenses is primarily on account of extension of the scheme to 130 more districts during the second year. But given that the Government is planning to extend the NREGS to all the rural districts of the country — bringing in over 250 more districts next year — budgetary allocation of Rs 16,000 crore for 2008-2009 may not suffice.

The Rural Development Ministry is counting on Finance Minister P Chidambaram’s announcement in the Budget that the Government would provide additional funds, if needed, to implement the job scheme. The ministry is also confident that the scheme will not face fund shortage as it is derived from an Act of Parliament, for which the Government will, in any case, make provisions as and when required during the next fiscal.

While the Government may consider the rising expenditure a success of its programme, it is likely to ring alarm bells for its fiscal consolidation plan.

In fact, the Economic Advisory Council to the Prime Minister, headed by former RBI governor C Rangarajan, in its Economic Outlook for 2007-08 submitted to Manmohan Singh last July, had attributed the increasing revenue deficit to expenditure on social sector schemes, including the NREGS.

“The revenue deficit has persisted in spite of impressive increase in Central tax revenues, and this is mainly due to continued increase in expenditure on various flagship schemes such as the Sarva Shiksha Abhiyan, National Employment Guarantee Scheme, National Rural Health Mission, Prime Minister’s Gram Sadak Yojana, Indira Awas Yojana, National Urban Renewal Mission and various other poverty alleviation and social development programmes in rural and urban areas,” the Economic Outlook had said.