Why MGNREGS wages are below the statutory minimum

Ever wondered why the centrally sponsored rural job guarantee scheme MGNREGS work pays below the statutory minimum wages and continues to violate the Supreme Court order of 1983 (Sanjit Roy vs Rajasthan case) which said “the State cannot be permitted to take advantage of the helpless condition of the affected persons and extract labour or service from them on payment of less than the minimum wage”?

Enough insight has been provided in latest parliamentary standing committee report, which did a “critical evaluation” of the scheme and was tabled just after the budget in February this year.

Indexing MGNREGS against inflation

The panel’s report devotes pages after pages to discusses why the Consumer Price Index-Rural (CPI-R) has not been used in place of Consumer Price Index-Agricultural Labour (CPI-AL) for indexation of wages under the MGNREGS for the past seven years. At least two government appointed committees, starting with 2015, have recommended this.

But this a relatively minor issue; the major one is about denying the statutory minimum wages to the MGNREGS workers, which violates the letter and spirit the MGNREG Act of 2005 and also violates the Supreme Court order of 1983. However, before getting there, here is a brief background and what the parliament panel’s report tells.

In 2009, the MGNREGS wage was first indexed against the CPI-AL. The Mahendra Dev committee set up in 2013 to look at the wages afresh, recommended in its 2015 report that the wages should be indexed against CPI-R instead, since CPI-AL and CPI-RL (Consumer Price Index-Rural Labour) were outdated, based as they are on the 1983 household consumption expenditure survey of the NSSO.

The Nagesh Singh committee, which was set up in 2017 to take another fresh look at the MGNREGS wages, endorsed it, explaining why. It said: “In CPI-AL and CPI-RL, food beverages and tobacco account for over 70% of the consumption basket. In CPI-Rural, they account for only 59%. CPI-Rural also provided for higher expenditure on education, medical care, and transport and communication.”

That is, CPI-AL/CPI-RL is heavy on food while CPI-R takes into consideration other expenditures, such as on education, health, transport and communication, etc. At the time (in 2017), the ministry of rural development (MoRD) estimated that such a shift from CPI-AL to CPI-R would cost ₹624 crore.

That (₹624 crore) would have been a gain for the MGNREGS workers.

The parliamentary panel says Ministry of Rural Development (MoRD), the administrative ministry for MGNREGS, accepted the Nagesh Singh committee recommendation and wrote to the Ministry of Finance (MoF) for approval. The MoF took nearly two years to approve it in February 2019.

The MoRD then started the process of revising the MGNREGS wages accordingly (for each state) and sent letters and reminders (a) to the Ministry of Statistics and Program Implementation (MoSPI) “to provide the information whether the base year revision of Consumer Price Index-Rural is under consideration” and (b) to the Ministry of Labour and Employment (MoL&E) “to confirm the status on revision of base year Consumer Price Index-Agricultural Labour”. Apparently, no response was received from either until the next two years.

Then in October 2021, a “deliberation” was held between the MoRD, MoSPI and MoL&E, following which it was decided that no change will be made and the indexation against CPI-AL would continue. No explanation was offered for this to the parliamentary panel, nor did the panel ask any.

What did the parliament panel finally recommend at the end of these deliberations?

It expressed concern about “low wage rates” of MGNREGS, pointed out that it had been telling the MoRD to index the wages against CPI-R for years, and then “strongly” recommended the same again. All this without demanding, strong or weak, explanations.

The panel’s second key recommendation was to bring uniformity in the wage rates among states, which vary widely.

As pointed out earlier, the panel maintains silence on the payment of minimum wages to the MGNREGS workers, although the issue figured briefly and the MoRD dismissed it — the reason for which will become clear soon.

Why no minimum wage for MGNREGS work?

It is often misunderstood that the UPA government, which brought in the MGNREG Act of 2005 and under which the scheme is run, had deliberately delinked the MGNREGS wages (unskilled manual labour) from the statutory minimum wages of states (agricultural wage for unskilled labour).

Section 6 of the MGNREG Act of 2005 spells out the wage rates. It says (1) the central government can notify its own rates, notwithstanding what contains in the Minimum Wages Act of 1948 that states follow and (2) that until the central government fixes separate rates for the MGNREGS workers, the minimum statutory rates fixed by states under the Minimum Wages Act of 1948 “shall be considered as the wage rate applicable to that area”.

From 2006 to 2009, the central government followed section 6(2) of the law and the statutory minimum wages of states were taken as the official MGNREGS wage rates. In 2009, section 6(1) was invoked and separate MGNREGS wages were prescribed at ₹100 or more for all states.

Here is a catch.

In 2009, most states had statutory minimum wages below ₹100. Only four states had more than ₹100 — Goa (₹110), Haryana (₹141), Mizoram (₹110) and Kerala (₹125). Thus, the 2009 notification of new wage rates allowed these states to retain their higher rates of more than ₹100 and allowed other states to give ₹100 to the MGNREGS workers (their own statutory rates were less than ₹100), except three states — Arunachal Pradesh (₹80), Odisha (₹90) and Jharkhand (₹99). In 2011, the fresh notification took into consideration the wage differences in states, particularly those with higher than ₹100, while indexing with CPI-AL.

So, both the 2009 and 2011 notifications were in good faith and ensured the statutory minimum wages for the MGNREGS workers.

Then in 2013, the Mahendra Dev committee was set up by the UPA government to take a fresh look at the wages. Its first recommendation was: “The baseline for MGNREGA wage indexation from 2014 may be the current minimum wage rate for unskilled agricultural labourers fixed by the States under the Minimum Wages Act or the current MGNREGA wage rate, whichever is higher.”

That is, the base wage rates of the MGNREGS works would be higher one of the two — the centrally notified ones and the statutory minimum rates of states — for indexation (inflation proofing) purpose. Its second recommendation was for indexing the wages with CPI-R.

The MoRD accepted the committee’s recommendations but the MoF rejected citing the fiscal burden involved. Then the government set up the Nagesh Singh committee of 2017 which rejected statutory minimum wages (for agricultural labour) for the MGNREGS workers on three grounds:

(i) There is a major difference in the work done by the agricultural labour and that of the MGNREGS workers. The wage rate for agricultural labour is “basically a time rate”, while that under MGNREGS is “piece rate”.

(ii) It is extremely difficult to align the two rates because of wide variations in the schedule of rates (SORs) across states.

(iii) No discrimination exists between male and female worker wage rates under the MGNREGS, while it does in the case of minimum wages for agricultural workers (women get less than men).

The committee concluded that in view of the above three it felt “there is no compelling argument for convergence of minimum wages for agricultural labour and wages notified for NREGA workers in view of the differences in activities performed by these two sets of workers”.

Of the three reasons, the third one is truly bizarre. Why should the MGNREGS workers be penalised for not discriminating between men and women in payment of wages?

As mentioned earlier, the central government was too happy to endorse the Nagesh Singh committee report (it delinked from the statutory minimum wages) but hasn’t implemented its other recommendations regarding indexing the MGNREGS wages to CPI-R and bringing uniformity to wages across states for the past five years or has offered any explanation for not doing this to the parliamentary panel.

Short-changing MGNREGS workers

As a result of denying the statutory minimum wages, the MGNREGS workers have lost a great deal. A national daily estimated that in the pandemic years of 2020 and 2021 alone, the MGNREGS workers were short-changed by ₹42,000 crore (the difference between their wages and that of the minimum agricultural wages of corresponding states).

The daily estimated this by using the official data provided by the MGNREGS’ website and the notified minimum statutory wages of states — something the MoRD hasn’t been able to do. The MoRD told the parliamentary panel that “the details of minimum wage currently applicable within the states is being collected and will be furnished as soon as available”.

In addition to not giving the statutory minimum wages, the central government short-changes the MGNREGS workers by giving negligible hike in wages (by way of indexing it against CPI-AL) — from ₹0-₹3 for most states to ₹8-Rs10 in very rare cases. About the 2021-22 MGNREGS wage rates notified by the central government, civil rights group NREGA Sangharsh Morcha commented: “There is no increase in Kerala’s NREGA wage rate. Rajasthan’s wage rate has increased by just ₹1. In fact, for 24 states, the increase in the NREGA wage rate is less than 5%.” Similar has been the case in previous years after 2014.

Because of this discriminatory approach, the difference in the MGREGS wages rates for states has widened sharply. For example, the wage rates for FY22 varies from ₹193 for Chhattisgarh and Madhya Pradesh and ₹198 for Bihar and Jharkhand to ₹269 for Punjab, ₹291 for Kerala, ₹315 in Haryana and ₹318 in three-gram panchayats of Sikkim. Rest all states/UTs fall between ₹200 to ₹300 bracket (majority remaining below ₹250, the parliamentary panel tells.

The MGNREGS web site shows the average all-India wage rate is ₹209 for FY22, rising slowly from ₹200.7 in FY21, ₹182 in FY20, ₹179 in FY19, ₹169 in FY18, ₹161.7 in FY17, ₹154 in FY16 and ₹143.9 in FY15.

The gap between the MGNREGS and statutory minimum rates has widened too.

For example, in Kerala, the statutory minimum (agricultural) wage is ₹410, against its MGNREGS rate of ₹315; for Punjab it is ₹369 against the MGNREGS rate of ₹291 and for Haryana it is ₹377 against the MGNREGS rate of ₹315. As pointed out earlier, the MGNREGS rates for states are fixed by the central government every year.

This difference worked out to ₹42,000 crore in the pandemic year of 2020 and 2021 — as a national daily estimated (mentioned earlier).

No unemployment allowance either

There is yet another key issue which is seldom discussed or highlighted: payment of unemployment allowance to those seeking MGNREGS work but finding no job within 15 days — a statutory requirement.

The parliamentary panel reports that in FY22, not a pie has been given as unemployment allowance (until November 15, 2021). In FY21, the unemployment allowance paid was ₹3,000; in FY20 it was ₹12,000; for FY19 it was ₹63,000 and for FY18 it was ₹2.82 lakh — progressively less and less is paid.

This is when the gap between the demand and supply of MGNREGS work remains very high year after year. For example, in FY22 (as on March 24, 2022), the unmet demand is 11% for households and 23% for individuals.

While discussing this at the parliamentary panel’s meetings, the MoRD passed the buck to states. To this, the panel used strong words to pan.

It said: “...the Committee cannot decipher the role of the nodal agency, the Department of Rural Development in this regard merely ‘passing the buck’ and moving one’s face in the opposite direction. This approach can not at all justify the inaction and callous methods of the Central Ministry regarding such a key provision.

“The Scheme is a Centrally Sponsored Scheme with all its modalities being supervised by the Department of Rural Development. In such scenario, the role of nodal agency is definitely of paramount importance and any inaction shows it in very poor light. Therefore, the Committee, while taking very strong notice of the dire situation firmly call upon the Department of Rural Development to shed its lackadaisical manner and ensure that the provision of MGNREG Act, 2005 do not remain unheeded but are implemented in true ‘letter and spirit’ on the ground level.”

One can safely assume that the situation wouldn’t be different the next time the parliamentary panel takes up the MGNREGS.