MGNREGA sees negligible increase in minimum wages in the time of Covid-19

The 4% rise in average all-India minimum wages is almost the same as CPI inflation rate between 2015-16 and 2019-20, meaning that in real terms, the increase has been insignificant

Last week, the Central government notified the minimum daily wages for MGNREGA workers for the 2021-22 financial year.

The average wage increase across the country was just about 4 per cent more than in FY21, which in absolute terms translates to a hike of just around Rs 9.

This, according to some experts, is lower than the average notified wages increase of 11 per cent between 2019-20 and 2020-21.

In some states and UTs, such as Meghalaya, Daman and Diu, Puducherry and Tamil Nadu, the increase was as high as Rs 17-23 per day, but in the big states of UP, Bihar, Rajasthan, Madhya Pradesh and Maharashtra, it has been just Rs 1-3 per day. (see table: NREGA wage rate comparison between FY20-21 and FY21-22)

The 4-per cent increase in average all-India minimum wage rates for MGNREGA is almost the same as the CPI inflation (rural and urban combined) of nearly 4 per cent between 2015-16 and 2019-20 (see table below).

Table: CPI (Rural+Urban Combined)

Year	Index	Change (%)
2013-14	112.2	NA
2014-15	118.9	5.97
2015-16	124.7	4.88
2016-17	130.3	4.49
2017-18	135	3.61
2018-19	139.6	3.41
2019-20	146.3	4.80

Source: MoSPI

This also means that in real terms, the wage increase has been insignificant.

The subdued rise in wage rates comes at a time when the rural job guarantee scheme has emerged as a safety net for migrant workers, who returned to their villages following the pandemic.

As on March 22, some 74.6 million households (110.2 million individuals) already availed the job guarantee scheme.

So far, over 3.74 billion person-days have been generated under the scheme in the current financial year.

Data from various sources says that between 2016-17 and 2020-21, the average paid wages (which is usually lower than the minimum notified wages in several states) for MGNREGA workers has been around Rs 47 during the past six years, which is an annual increase of Rs 8 or Rs 800 per year, assuming that an eligible household gets full 100 days of work in a year.

But the same is never realised, because work provided under the scheme lasts no more than 45-50 days on average.

Several experts also question the opaque manner in which minimum wage rates are set, though officially they are linked to CPI-Agriculture Labour (CPI-AL).

CPI-AL versus CPI-RL debate

There have been several suggestions in the past to peg MGNREGA minimum wages to CPI-Rural Labour (CPI-RL) instead of linking it to CPI-AL, which will give a realistic estimate and figure of increase.

The argument is that since MGNREGA wages are linked to CPI-AL at present, the quantum of annual hike is negligible, as CPI-AL has a higher weightage to food items particularly cereals

But since the enactment of the National Food Security Act (NFSA) in 2013, cereal prices for the poor, as provided under the Public Distribution System (PDS), have remained stagnant at Rs 3 per kg for rice, Rs 2 for wheat and obe rupee per kg for coarse cereals sold at ration shops.

Officials said because of this, CPI-AL has hardly moved in the past few wages, due to which wages aligned with them have also not risen much.

In fact, in some years in the past, MGNREGA wages had risen by a mere Rs 1 per day on average in most states.

Also, since they are aligned with CPI-AL, MGNREGA wages are lower than the minimum wage fixed in many states, which leads to lower-than-budgeted person-days of work as workers prefer to function outside the MGNREGA ambit.

Once wages are linked to CPI-Rural Labourers, the annual hikes would be more as the weight of food items in the index is less.

A high-powered panel set up by the government had favoured changing the parameter of linking and the Rural Development Ministry itself supports the proposal. However, sources said things get stuck at the finance ministry level which fears a sharp and perpetual increase in financial allocation once wages get linked to the new index.

Civil society activists have been long demanding revision of MGNREGA wages as the current system is riddled with delays, making the entire scheme unremunerative for workers.

MGNREGA demand and unpaid dues

Despite a spike in revised projections for spending under MGNREGA to Rs 1,11,500 crore for FY21 in the Union Budget, a significant amount of unpaid dues is still expected to be carried over to the next financial year, as demand for work under the scheme continues unabated in rural areas.

Experts said this will also mean that from next year’s Budget allocation of Rs 73,000 crore for MGNREGA in 2021-21, at least 15-20 per cent could go towards clearing of pending dues, as has been the practice in the past as well.

“In the past five years on average, 20 per cent of the budget has been used to settle the pending liabilities of the previous years. If we expect the same in the coming financial year, then essentially about Rs 60,000 crore will be left to generate employment,” a statement from People’s Action for Employment Guarantee (PAEG) said sometime back.

“This year the pending wages will be much higher than in previous years, increasing the burden of the rural population. Since, most rural households have exhausted their savings, a delay in getting their wages will have its own consequences, and could compel them to borrow at usurious rates,” M S Raunaq, secretary of PAEG has then told Business Standard.

In the current financial year also, of the Rs 1,11,500 crore allocated as per the revised estimate, some Rs 13,760 crore was spent on clearing dues carried over from the previous year. 

Therefore, despite a near 81.3 per cent jump in revised estimates for MGNREGA in 2020-21 from the Budget Estimates, due to Covid-related demand for extra work from rural areas, the actual fund available for spending on the scheme this year was about Rs 98,000 crore.

Of this, a significant portion of around Rs 94,000 crore (96 per cent) has already been spent under MGNREGA till February 19, the scheme’s website showed, as work demand continues to remain significantly higher than 2019-20.

Though much lower than the peak months of May, June and July, demand for work under MGNREGA remains robust so far.

In January 2021, some 26.28 million households sought work under the scheme--39.12 per cent more than the same period last year.

"The country’s economy has not fully recovered from the disruptions caused by the Covid-19 pandemic and the various lockdowns imposed by the government last year. Even though working conditions remain precarious in urban areas, many workers who returned to their villages last year are once again being forced to migrate in search of work. Some had to go back to their village empty handed. The negligible increase in NREGA wages for the coming financial year will only reinforce this trend," the MGNREGA Sangharsh Morcha said in a statement. 

It said a well-functioning NREGA with adequate wages can provide a lifeline to rural workers and play a key role in reducing distress migration.

"NREGA Sangharsh Morcha demands that the central government increases NREGA wage rate at least to the level of the statutory minimum wage rate for agriculture. Over time, the government must also align the wage rates as per the recommendations of the Seventh Pay Commission," it added.