The AAP government’s decision seems to be driven mainly by its financial troubles as it faced the prospect of losing nearly Rs 750-800 crore in central funds for this crucial scheme.
Last week, the state government’s Rural Development and Panchayats Department notified the implementation of the G RAM G Act from July 1.
The notification came six months after the Mann government convened a special session of the Assembly, on December 30, 2025, to reject the G Ram G Act, which was passed by Parliament a couple of weeks earlier.
The AAP dispensation had staunchly opposed the Narendra Modi government’s move to replace the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) with the G Ram G Act.
During its special session, the Punjab Assembly unanimously passed a resolution, urging the Centre to withdraw the G RAM G law. The AAP camp argued that the new scheme “diluted” the rights-based character of the MGNREGA, passed a greater financial burden on to states, and affected rural workers “adversely”. Chief Minister Mann described the G RAM G law as “anti-poor, anti-farmer, anti-Dalit, anti-women and anti-labour”.
Sources in the AAP government insist that its current pivot has “nothing to do with politics and everything to do with finances”, saying that Punjab could not afford to lose the Centre’s share under the new scheme. The state is expected to receive around Rs 750-800 crore from the Centre for the G RAM G scheme’s implementation which would involve an annual outlay of around Rs 1,250-1,300 crore with the state’s share being pegged at Rs 500 crore.
“The government simply could not let go of such a large central grant,” said a senior government functionary. “The funds are meant to provide employment in rural areas. Rejecting the scheme would have meant denying those funds to the beneficiaries.”
Under the G RAM G scheme, eligible rural households will be entitled to up to 125 days of wage employment annually, with the Centre and the state funding the wage cost in 60:40 ratio. It was this funding pattern that Punjab had opposed when the law was brought by the Modi government last year.
Under the MGNREGA, the Centre was required to make 100% payment for wages and share 75% of material and administrative costs with states.
“We will end up bearing the cost of Rs 500 crore for implementing the G RAM G scheme this year. We have already set it aside in the Budget. The Assembly resolution was a political decision. It was to convey a message that we are against the change. But now, on the ground, we need to implement it for people,” the functionary said.
What seems to have given urgency to the AAP government’s move is the approaching state Assembly elections which are due in February 2027.
Debt crisis, sops
Punjab has been reeling under a financial crisis for several years. As per the Mann government’s Budget for 2026-27, the state’s total debt has grown to Rs 4.07 lakh crore, which is projected to rise to Rs 4.47 lakh crore in the next financial year after additional borrowing of Rs 39,970 crore.
The rising debt has also increased the state’s interest liability. In the current fiscal, Punjab is expected to pay Rs 28,755 crore as interest on its borrowings and Rs 13,725 crore towards repayment of public debt. A substantial portion of the state’s revenue is directed towards servicing debt instead of funding development projects or strengthening essential sectors such as health, education, and infrastructure.
When the AAP government assumed office in March 2022, Punjab’s debt stood at Rs 3.23 lakh crore. Its debt burden has since registered a sustained rise. Various sops have significantly strained the state exchequer, with the total subsidy bill touching Rs 26,612 crore. The AAP government is likely to put an additional burden of about Rs 20,000 crore on freebies alone by the end of its term.
On July 1, the Mann government is also set to roll out its flagship women financial aid scheme, Mawan Dhiyan Satkar Yojana, meant for every eligible woman above 18 years. Under this scheme, women in the general category will receive Rs 1,000 per month, while those belonging to the Scheduled Castes (SCs) will get Rs 1,500.
In its current Budget, the AAP government has allocated Rs 9,300 crore for the women dole scheme, with Mann announcing that its beneficiaries would receive three months’ payout, covering April-June, together in July.
Oppn’s attack
The Opposition has slammed the Mann government’s “U-turn” over the rural employment scheme.
Punjab Congress president Amarinder Singh Raja Warring asked the government what changed between December and June to warrant its fresh move. “If the AAP government believed the G RAM G law was anti-poor and persuaded the Assembly to reject it, the government owes an explanation to the people for quietly implementing it now.”
The Sukhbir Badal-led Shiromani Akali Dal (SAD) accused the government of “hypocrisy”, saying it cannot first condemn a law in the House and later accept it without explaining the reasons behind the reversal. SAD spokesman Parambans Singh Bunty Romana said, “The notification is evidence that the government has abandoned the stand it took in the Assembly. Who is superior – the Assembly’s resolution or the executive’s decision to implement it?” he asked.
Finance Minister Harpal Singh Cheema however defended the move, saying the government could not deprive poor workers of employment funds. “Had we not notified it, the beneficiaries would not have got the money. We could not forgo poor workers’ money. As a matter of principle, we opposed the changeover from MGNREGA to VB-G RAM G,” he said.
AAP leaders also argue that Punjab is not the only non-BJP ruled state to have taken such a “practical approach”. They point out that the Congress-ruled states such as Himachal Pradesh and Karnataka would also implement the scheme while continuing to voice reservations over some of its provisions. “Governments may oppose the policy but cannot afford to let rural workers lose central assistance,” said an AAP leader.