Budget dilemma: Will Siddaramaiah fund or shun VB-G RAM G?

Is Chief Minister Siddaramaiah facing a big dilemma even as he prepares to table his 17th state budget in March?

With the Centre allocating funds for the new Viksit Bharat–Guarantee for Rozgar and Ajeevika Mission (Gramin) scheme (Rs 95,692 crore nationally) and also the UPA-era MGNREGA (around Rs 30,000 crore), the CM needs to take a tough call on foregoing Central grants of nearly Rs 4,800 crores a year to toe the party line of rejecting the new VB-G RAM G scheme.

The Siddaramaiah government must balance fiscal prudence with political positioning as it prepares the 2026–27 budget. On one hand, it has to provide funds for NREGA, which will be phased out in six months. On the other, it must decide whether to allocate funds for VB-G RAM G, which the Congress has strongly opposed since the Bill was passed in Parliament.

The party, led by Rahul Gandhi, has launched a nationwide protest demanding its repeal, labelling it a “black law” and an “anti-poor” move. The state legislature too has passed a resolution rejecting the new scheme and seeking restoration of MGNREGA.

The year 2026–27 will be a transition phase, when NREGA’s pending bills are cleared and incomplete works completed, after which allocations will cease. States will need to frame rules for implementing VB-G RAM G and submit annual work plans and labour budgets to the Union Rural Development Ministry before January 31 each year to avail of Central grants.

Karnataka will have to make budgetary provisions for NREGA while also earmarking funds for VB-G RAM G, as the drought-prone state risks being left without a rural employment scheme to prevent distress migration or create assets across its 6,000-odd gram panchayats.

Finance experts have reportedly advised Karnataka to implement VB-G RAM G “under protest” rather than lose substantial Central assistance.

How much grant will K’taka lose?

By one estimate, with the current NREGA wage rate at Rs 370 per day and material costs adding 40%, the per person-day cost comes to Rs 616. Considering the state’s annual target of 13 crore person-days, the total normative allocation would be about Rs 8,000 crore a year, of which the Centre’s 60% share would amount to roughly Rs 4,800 crore.

A key shift under the new law is the move from a demand-driven labour budget to a “normative allocation” determined by the Centre. Section 4(5) of the Act empowers the Union government to fix state-wise allocations based on prescribed parameters, while Section 4(6) makes it clear that expenditure beyond this allocation must be borne by the state. State officials confide that even under MGNREGA, states rarely exceeded labour budgets due to limited technical capacity across departments, especially at the gram panchayat level.

The Centre flagged misuse of funds, weak monitoring and poor asset quality under MGNREGA. In 2024–25, alleged misappropriation stood at Rs 193.67 crore nationally, while only 7.61% of households completed the full 100 days of employment.

Defending the old scheme, RDPR Minister Priyank Kharge stated Karnataka was a major beneficiary of NREGA, as works worth Rs 21,411 crore has created 16 lakh assets over the past three years, while providing work to 80.2 lakh households.

Senior government officials are awaiting the Chief Minister’s decision. They privately concede that the state may not forego Central support, especially as the exchequer is already strained by the five guarantees, leaving little room for a separate state-funded rural employment programme.

The March budget will ultimately reveal whether Karnataka opts for financial pragmatism or political defiance in its rural employment strategy.