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LATEST NEWS UPDATES | Can Centre fix NREGS wages in isolation? by M Rajshekhar

Can Centre fix NREGS wages in isolation? by M Rajshekhar

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published Published on Apr 5, 2011   modified Modified on Apr 5, 2011

Sometime this month, Justice N Ramamohana Rao of the Andhra Pradesh High Court will deliver a verdict that will directly impact earnings of the 114 million people who work under the National Rural Employment Guarantee Scheme (NREGS), the Central government's work guarantee programme. The verdict will also indirectly impact earnings of the 400 million workers and labourers who toil in India's factories and fields for 'minimum wages'.

The question Justice Rao will try to answer is this: can the Centre fix NREGS wages in isolation, or should it set it at the minimum wage rate prevailing in each state? The first option confers power on the Centre and allows it to pay less than the minimum figure set by a state for its workers. In doing so, it goes against the Minimum Wages Act, 1948, the law that sets the baseline for worker earnings.

The second option makes it toe that law. The five-year experience of NREGs, and what it has done to worker empowerment and minimum wages in India, shows that this is a complex question. Interwoven into it are livelihood issues, worker rights, centre-state relations and politics.

States Spot an Opportunity

The NREGs is one of the largest state interventions in India's labour market. In 2009-10, NREGS put Rs 39,100 crore in the hands of 52 million households in 619 districts, according to the Ministry of Rural Development, which oversees the programme. Sure, some of this money never reached these households, but let's leave that aside for now.

When it started, in 2005, the Centre set the NREGS rate at Rs 60 per day or the minimum wage rate set by a state, whichever was higher. So, if the minimum wage rate of a state was below Rs 60, the Centre paid Rs 60. If it was above Rs 60, it paid the higher rate.

Back in 2005-06, according to data available from the ministry, the minimum wage rate in six out of 25 states was less than Rs 60. Gujarat, one of the most economically progressive states, was the lowest: Rs 50. The minimum rate in another 10 states was between Rs 60 and Rs 70. The remaining nine were above Rs 70, led by Kerala with Rs 125.

The arrival of the NREGS started pushing up minimum wages. "State governments began realising that the NREGS, which puts cash directly in the hands of the poor, was a great way to build political capital," says a joint secretary in the ministry of rural development, not wanting to be identified. "Better still, the Centre paid for it." In the initial months, the joint secretary says, states took one of two approaches.

The first approach was to increase minimum wages. Like Uttar Pradesh, which then had a minimum wage rate of Rs 58. Under Mulayam Singh Yadav , who presided over the state from 2003 to 2007, UP had not revised minimum wages for five years. After Mayawati took over in 2007, she increased it to Rs 100. "Yadav's support base are the landed elite, Mayawati's are the landless," explains the joint secretary.

The second approach, followed by Gujarat among others, was to leave the minimum wage rate untouched. Instead, for NREGS alone, Gujarat diluted its schedule of rates (SOR), which define the amount of work a worker needs to do for a full day's wage. Effectively, an NREGS worker received more money for the same amount of work. The idea was to not draw the ire of industry and large farmers, while passing on the benefits to NREGS workers. Between 2006 and mid-2007, SORs were liberalised heavily.

The Centre Responds

Thus began a game of cat and mouse between the Centre and the states. The Centre cracked down on SOR revisions. In response, states began to raise minimum wages, first to appease their people by using the Centre's money, then to score over adjoining states.

After UP increased minimum wages, Rajasthan found its labour migrating to UP. So, it also increased its minimum wage rate from Rs 73 to Rs 100. Bihar and MP followed. "States were raising minimum wages not based on inflation or local economic trends, but in competition with each other," says the joint secretary.

The impact of NREGS was deep and wide. While workers began demanding, and often received, more wages, industry and large farmers saw their wage bill shoot up. "It's getting harder to find labour at a reasonable price," says S Sundaresan, a large farmer in Thanjavur district of Tamil Nadu: "At this rate, after two years, no paddy will be grown here."

Kaustav Bannerjee, a professor at Jawaharlal Nehru University in New Delhi, says NREGS has reduced migration. In a paper titled 'Rights in Theory and Practice: A Case Study of the NREGA', Bannerjee, who studied NREGA implementation for his PhD, wrote: "In 2006, around 421,000 migrant workers came from Uttar Pradesh and Bihar alone to work in Punjab. In 2008, the figure could have reduced to 250,000."

At the same time, with little attention on implementation, NREGS projects were not meeting deliverables. For instance, according to the ministry of rural development, just 8.2% of NREGS projects were completed in 2007-08 and 12.1% in 2008-09. Says the joint secretary: "The NREGS was becoming a dole programme creating poor assets instead of a rural safety net that also built good assets."

In 2008, the Centre decided NREGS wages would no longer be automatically revised every time a state upped its minimum wage. Instead, the Centre would approve it on a case-to-case basis. In 2009, when India went for general elections, the Congress promised "at least 100 days of work at a real wage of Rs 100 a day for everyone as an entitlement under the NREGA".

When it returned to power, the UPA delivered on this promise: Rs 100 became the new NREGS minimum, against Rs 60 earlier. But it remained linked to the Minimum Wages Act. So, in states where the minimum wage rate was higher than Rs 100, the Centre was till paying the higher rate to NREGS workers.

Rights and Wrongs

This changed in January 2009. A ministry of rural development notification delinked NREGS wages from the Minimum Wages Act. It set the NREGS wage rate at Rs 100 or the state's minimum wage rate then, whichever was higher. Further, that rate would be increased for inflation every year. If a state whose minimum wage rate was higher wanted to pay more, it could do so, but the Centre would contribute only Rs 100; the balance would have to be met by the state.

The Centre, worried by the tendency of states to increase minimum wages, was effectively capping its NREGS obligation. "States were realising the potential of NREGS, and there was a possibility that this might start spinning out of control," says another senior bureaucrat in the ministry of rural development, not wanting to be identified. "What if a state increased its minimum wages to Rs 300? Will the centre have to pay?"

The Centre's delinking of NREGA wages from the Minimum Wages Act has become an issue in states whose minimum wages are above Rs 100. NREGA workers in those states are effectively being paid below minimum wages. In Andhra Pradesh, Ajay Kumar of Vyavasaya Vruthidarula Union and four other workers of Visakhapatnam district, where the minimum wage is Rs 119, have filed a case against the Centre in the Andhra Pradesh High Court.

Lawyer Prashant Bhushan is representing them and a verdict in the case is expected later this month. "We are arguing that the Centre has to pay the state minimum wage," says Reddy Subramanyam, rural development secretary of Andhra Pradesh.

Activists say the issue goes beyond the squabble between the Centre and the states on who should pay. Nikhil Dey, an activist with the Mazdoor Kisan Shakti Sangathan (MKSS), says the delinking weakens both the NREGA and the Minimum Wages Act. "NREGA is supported by two rights. It directly confers upon all citizens the right to at least 100 days of work. And, because of its link to the Minimum Wages Act, it confers the right to get a minimum wage," he says. "The delinking reduces the NREGA wage from a right to an amount set by the government."

Aruna Roy, NAC member and one of the founders of the MKSS, says it's a question of worker rights. "A right is being taken away and being replaced with a higher wage," she says. "But what if they take that wage away later? A right is fundamental. We cannot lose that right."

Corrections or Distortions?

The senior bureaucrat in the ministry of rural development says NREGA, by its very nature, is not the benchmark for minimum wages. "NREGS is supposed to be the employer of last resort, a safety net. Only when people do not find work anywhere else should they come to NREGA. For that reason, it cannot be the minimum wage," he says. "What that will otherwise do is compete with business and others for labour, and take people away from productive employment."

This is also the position taken by the finance ministry while drawing up NREGA. Ian MacAuslan writes in a paper on the drafting of the Act: "The ministry of finance argued that the state minimums are designed to support market wages, but the NREGA provides employment of last resort. Its wage rates should, therefore, be designed to meet targeting objectives. The NREGA wage is a different issue from state minimums."

However, the experience of the past five years shows that in linking itself to the minimum wage rate, the NREGS wage rate did more for worker earnings than all state diktats put together. "Minimum wages began to be enforced only after NREGS was pegged to it," says Dey. "I fear delinking will again reduce the Minimum Wage Act to a well-meaning, but poorly-enforced, law."

In areas where labour is in abundance, or power dynamics are skewed, wages can fall to ridiculous depths. Says B Rajshekhar, who heads Society for Elimination of Rural Poverty (SERP), Andhra Pradesh: "For the longest time, wages in the state's coastal districts ranged from Rs 60-70 and Rs 30-40 in the interiors. Women got even less than that." NREGA, linked with the Minimum Wages Act, has shown the ability to bring about market corrections. "Only in the last two years have wages increased," adds Rajshekhar.

While there have been much-needed corrections in parts of the country, there are still large swathes of industry and agriculture where labourers are still paid less than the prescribed minimum wage. "Minimum wages are hardly ever paid," says Subramanyam of the Andhra government . "Even the process of determining minimum wages is not in place. It's just a paper exercise at the best of times."

A workshop in New Delhi in January organised by the MKSS and the Bandhua Mukti Morcha, which works against bonded labour, highlighted the flaws in the minimum wage policy. There were bonded labourers who were being paid less than Rs 400 a month. Speaking at the workshop, retired Delhi Chief Justice AP Shah, who delivered the landmark verdict on Section 377 legalising same sex relationships, said: "Minimum wage is defined as the bare minimum a person needs to survive...the Centre cannot take a stand that it will pay less than the minimum wage."

The senior bureaucrat says the gap between the two wages is a short-term problem, which will be resolved in the next round of NREGS wage revision in January 2012. At present, there are eight states where NREGS wages are lower than its minimum wage.

"They will see their NREGS wage rate move closer to their minimum wage rate. In states where NREGS wages are higher, states will increase minimum wages to bring them in line with the NREGS wage," he says. "There will be convergence and the NREGS wage rate will become the new de facto minimum wage." In effect, the Centre will decide what the minimum wage for a state should be. And that's another reason why this might not be desirable.

The Economic Times, 5 April, 2011, http://economictimes.indiatimes.com/opinion/can-centre-fix-nregs-wages-in-isolation/articleshow/7870275.cms?curpg=1

Tagged with: NREGS



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