The Mahatma Gandhi National Rural Employment Guarantee Act (NREGA) has been hailed as a landmark initiative to alleviate poverty and generate productive wage employment, even if for only 100 days, for unskilled rural labour. Given its historic features, it is a pity that the rollout of the programme in many states has been less than satisfactory, and leakage of funds has become rampant. More worryingly, it has begun to have an adverse impact on rural labour markets and the wage structure. Mindful of the impact of NREGA on farm wages, the Union rural development ministry had specified a cap of Rs 100 per day. This had predictably evoked protests from labour activists for being lower than the mandatory minimum wages in many states. Interestingly, these critics now have the backing of the National Advisory Council (NAC) which wants NREGA wage rates to be linked with minimum wages. However, the rural development ministry’s reluctance to concede this plea is understandable because the purpose of fixing the NREGA wage below even the minimum wage was to make the programme self-targeting. That is, only the really needy would offer themselves for work. Moreover, the idea of a national minimum wage is faulty in a diverse economy like India’s. State governments ought to have the freedom to also shape a statutorily defined minimum wage.
The harsh truth that is often lost sight of is that the mandated minimum wage does not have much sanctity in rural areas where the actual wages are determined by demand-supply equilibrium which varies with cropping season. Aligning wages under NREGA with minimum wages would distort the rural labour market further. Besides, it would pose difficulties for the Centre to strike a balance in allocating NREGA funds to different states. A better bet would, perhaps, be to fix a reasonable central wage rate and let the state governments augment it from their own resources if they so wish. This apart, the guaranteed employment under NREGA has restrained the usual seasonal labour migration, which had become the mainstay of farming in agriculturally progressive, but labour-starved, states. This has caused acute shortage of labour for agriculture. Particularly hit are plantations in the southern states, notably Kerala, and the cultivation of labour-intensive crops like rice, wheat and sugarcane. The farmers are forced to incur additional expenses for using machines and energy for doing farm operations which were earlier performed manually by migratory labour at far lower costs. Sales of tractors and crop sowing and harvesting machines are reported to have risen sharply as a result. Farmers’ organisations have come out with a sensible suggestion that the mandatory 100 days employment in a year should be provided only during agriculturally lean seasons. This will be a win-win situation for both farmers and farm labour. While the farmers will get labour when they need it the most, the labourers will be able to remain employed for a longer period in a year.
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