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LATEST NEWS UPDATES | Legal changes to enable separate NREGA wages by Devika Banerji

Legal changes to enable separate NREGA wages by Devika Banerji

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published Published on Feb 14, 2012   modified Modified on Feb 14, 2012

Worried at the prospect of having to match the arbitrary minimum wage rate fixed by the states, the central government is considering changes in the law to specify a separate wage norms for its flagship rural employment guarantee scheme that is undergoing a complete makeover under minister Jairam Ramesh. 
NREGS
The centre has already contested in the Supreme Court a Karnataka High Court interim order directing it to align wage rates under the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS) with the minimum wages in the state. 

It now wants to legislate a standalone wage regime for the scheme under the Minimum Wages Act, 1948, worried that states may otherwise arbitrarily increase minimum wages, leaving the centre to foot the bill. 

The financial implication of Karnataka order that applies to payments for works since September 2011 is about Rs 300 crore. 

"We are preparing a cabinet note and we will go to the cabinet for amending the existing act. This will give NREGA wage rate statutory validation and the centre will have the right to revise it," minister for rural development Jairam Ramesh told ET. 

The constitutional amendment to the Act will legally establish the MGNREGA wage rate as an independent wage rate delinked from the minimum rate fixed by the states. 

There are six states as of now that have minimum wages that are higher than the rate prescribed for NREGA works. If the Karnataka ruling were to apply to all of them the government would have to shell out Rs 900 crore more. 
 

If backlog of 2 years is accounted for, then the financial implication increases to Rs 4,000 crore. The six states are Andhra Pradesh, Rajasthan, Kerala, Karnataka, Mizoram and Goa. The Rs 40,000 crore NREGA has enough funds to meet these extra demands, but the linkage between NREGA and state specified minimum wages could encourage states to arbitrarily hike minimum wages. 

Orissa, for instance, which was paying a mere Rs 50, saw its minimum wages jump to Rs 80 in 2008 while Uttar Pradesh increased its minimum wages four times in 10 months during 2008-09 by around 150%. 

The Finance Ministry and the Prime Minister's office had resisted linking of the two wage rates, concerned over the unsustainable burden on the fisc in future. 

"Contesting the order in SC was based on legal technicalities of the case. But this proposal will address the issue in the long run. The Prime Minister's office has also supported it," Ramesh added. 

The amendment will involve works taken up under MGNREGA to be added in the Minimum Wages Act, 1948 with only the centre having the authority of revision. 

The draft cabinet note argues that considering the nature of works undertaken under MGNREGS is a mixture of different types of works like agriculture, irrigation works, road construction among others, these have a separate identity from the existing nature of works stated in the Act. 

The Economic Times, 14 February, 2012, http://economictimes.indiatimes.com/news/economy/policy/legal-changes-to-enable-separate-nrega-wages/articleshow/11880120.cms


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