Tamil Nadu Former Minister Warns New Central Scheme Strains State Finances

Implementation of the VB-G RAM-G scheme by the Tamil Nadu Government without opposition against the Centre would amount to a failure in protecting the state's financial well-being and its rights, according to former State Finance Minister Thangam Thennarasu. He made the remarks on Wednesday, July 1, 2026.

The scheme, which replaces the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA), has drawn criticism over its financial implications. Mr. Thennarasu, who is also the Tiruchuli MLA, stated that under MGNREGA, the Union Government bore 90% of the expenses, while the state contributed 10%. Under the new VB-G RAM-G scheme, the state's contribution has been increased to 40%, effective from July 1.

“State governments have been burdened with additional financial responsibility. The primary objective of the federal set-up was that the Centre and the State should share responsibilities in a fair manner. Increasing the state's contribution will put additional strain on developmental schemes and fiscal management,” Mr. Thennarasu said.

He noted that the devolution of funds from the Centre to states has been declining, and reducing the Centre's contribution to centrally-sponsored programmes will exacerbate fiscal strain on Tamil Nadu. Additionally, he pointed out that the basic rights of Grama Sabhas to decide on the number of man-days and nature of work under MGNREGA have been curtailed under VB-G RAM-G. The new scheme shifts from demand-driven to supply-driven normative funding, where work allocation is based on budget rather than local needs.

Mr. Thennarasu questioned whether the scheme could be implemented effectively in its present form. The Tamil Nadu Government has been urged to mount a formidable opposition against the Union Government regarding these features, which he argued affect the state's well-being and rights.