Tamil Nadu Rural Employment Funds to Drop to Rs 3,923 Crore Under New Central Draft

State officials in Chennai have revealed that Tamil Nadu is set to face a steep reduction in central funding for the VB-G RAM G rural employment scheme under a new draft proposal from the Union rural development ministry. The state's share of national funding is projected to drop to approximately 4.1 percent, down from the nearly 10 percent average it has received since 2014.

The revised allocation formula, based on parameters recommended by the 16th Finance Commission, replaces the traditional demand-driven funding architecture of the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS) with a normative allocation model. The Union government has notified that the MGNREGS will be officially replaced by the VB-G RAM G Act starting July 1.

According to state government data, Tamil Nadu has received Rs 87,639 crore under the rural employment programme since 2014. However, under the newly proposed mechanism, the state is projected to receive only Rs 3,923 crore out of the total national allocation of Rs 95,692 crore for the 2026-27 financial year.

This projected drop follows a multi-year decline in the state's funding. Tamil Nadu received Rs 12,698 crore in 2023-24, which fell to Rs 10,156 crore in 2024-25, and decreased further to Rs 5,878 crore in 2025-26.

The draft rules distribute funds based on specific criteria, including population data from the 2011 census, per capita Gross State Domestic Product (GSDP), and demographic performance. State officials argue this formula disadvantages southern states that have achieved higher economic growth and demographic transition, while benefiting more populous northern states. Other southern states, including Andhra Pradesh, Telangana, and Kerala, are also expected to see funding cuts of 30 percent to 40 percent.

A senior state government official stated that the shift goes against the foundational, demand-driven nature of the employment guarantee programme and will adversely affect rural parts of Tamil Nadu.

The Union ministry issued the notification on May 22, allowing a 30-day window for states to submit suggestions and objections. Despite the feedback period, state officials expressed skepticism about whether any major changes would be made to the draft proposal.