Plug the gaps

Tinkering with MGNREGA wages is dangerous

The plea by the parliamentary standing committee on rural development to bring wages paid under the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) on a par with the minimum wages fixed by the states has implications that merit careful scrutiny. True, the panel's 42nd report details several problems in the scheme's implementation that call for expeditious remedial action. But parity between the wage rates for the MGNREGA scheme and those under the Minimum Wages Act will put an additional annual fiscal burden of Rs 2,000 crore on the Centre - something that the government can ill afford at the moment. Payments under the MGNREGA in at least eight states are lower than the prescribed minimum wages. The synchronisation of the two wage rates is bound to spur these eight states, as well as other states, to arbitrarily raise the mandatory floor wages to attract more central resources to their rural areas, thereby bloating the subsidy bill. A trend towards this end is already in evidence. Uttar Pradesh, for instance, has increased the minimum wage rate four times since the MGNREGA was launched.

Tinkering with the MGNREGA wage rate will also tend to alter the fundamental character of the world's largest employment-linked welfare programme. It was originally conceived as a demand-driven and self-selecting wage employment scheme that would guarantee paid work to those who failed to find jobs elsewhere. The MGNREGA statute stipulated that payments must be determined by actual work done and not according to any fixed per-day rate. The present system, which links wage rates to the consumer price index, was introduced only through an office order as a compromise formula in the wake of activists' demand to link payments under the MGNREGA with minimum wages. However, there is a limit beyond which the self-selecting part of the programme, which ensured that its distortions were kept to a minimum, will stop working. That point will be reached when it is a perfect substitute for all other available work in rural areas - and enforcing local minimum wages in the programme will do just that.

That said, there cannot be any dispute over paying attention to the wise counsel from the members of Parliament regarding revamping the MGNREGA programme to curb rampant corruption and irregularities in its implementation. The panel's report has recorded evidence of widespread misappropriation of funds, fudging of job cards, belated and underpayment of wages, non-payment of unemployment allowances, incomplete work, poor quality of created assets and various other malpractices. The guidelines issued by the rural development ministry for selecting and executing the works under the MGNREGA are evidently defied and violated at will, usually with the connivance of the panchayati raj officials. The existing system of vigilance and monitoring through social audit, sponsored studies and surveys has apparently failed to prevent such malpractices. Unless these issues are suitably addressed, the programme may end up doing more harm than good.