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Priority is finding new wage base: NREGA panel

Currently wages are linked to CPI AL

BS Reporter  |  New Delhi 

Mahendra Dev, who heads the committee set up by the rural development ministry to determine a new index for wages under the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA), has said his job is not to engineer an increase in wages to suit political interests. “My job is to find a suitable index for MGNREGA wages, based on which a new baseline wage can be fixed for 2014,” he said.

The baseline wage for different states was last fixed in 2009.

Talking to Business Standard, Dev, earlier chairman of the Commission for Agricultural Costs and Prices, said while selecting an index, the primary consideration would be what affected rural labourers the most. He added as these labourers spent 60 per cent on food, this was the most important factor.

  • Currently, wages under MGNREGA are indexed to CPI (AL)
  • The other option before the committee is to index wages to CPI (for rural areas)
  • While CPI (AL) gives 41% weightage to cereals, CPI (rural areas) gives 19%
  • For CPI (rural areas), the weightage to miscellaneous expenses is 25%, against only 12% in CPI (AL)
  • Food & beverages account for 57% in CPI (rural areas); 69% in CPI (AL)
  • CPI (rural areas) is based on consumption data of 2004-05, while CPI (AL) is based on 1983 data
  • Mahendra Dev, head of the panel deciding the MGNREGA index says it is wrong to assume either of the two indices would raise wages

Currently, wages under the rural job scheme are indexed to the Consumer Price Index (agricultural labourers), or CPI (AL), which has a larger share of the food component and reflects food inflation. The other option before the committee is to index wages to CPI (for rural areas).

While CPI (AL) gives 41 per cent weightage to cereals, for CPI (rural areas), it is 19 per cent. In the latter, the weightage to miscellaneous expenses such as education, medicine and transport is 25 per cent, against only 12 per cent in CPI (AL). Food and beverages account for 57 per cent in CPI (rural areas) and 69 in CPI (AL).

He also pointed out that CPI (rural areas) was based on more recent consumption data of 2004-05, while the CPI (AL) was based on 1983 data, which is outdated, indicating that CPI (rural areas) was very much in the reckoning.

Dev said CPI (rural areas) was based on more recent consumption data of 2004-05, while CPI (AL) was based on 1983 data, which was outdated. “I don’t rule out either option,” Dev said, adding it was wrong to generalise CPI (AL) or CPI (rural areas) would give higher wages under the scheme.

While CPI (AL) showed an increase of 8.7 per cent in 2012, CPI (rural areas) recorded a rise of 9.5 per cent. This year, however, the case was the opposite, thanks to food inflation, Dev said. While CPI (AL) rose 12 per cent this year, CPI (rural areas) increased 10 per cent. So, indexing MGNREGA wages to either index would have different results at different times, Dev said.

Ruling out any dramatic increase in wages, he said the primary task of the panel wasn’t political or electoral gains, but finding a baseline wage to replace the one selected in 2009. “It has to be revised by 2014. The arrangement in 2009 to use CPI (AL) to index the wages was an ad hoc one, and a permanent solution has to be found,” he said.

The baseline wage would vary across states, as was the case now, he said.

Dev has said the funds spent under MGNREGA have been declining through the years and would remain low this year, too. A change in the index, he added, wouldn’t increase the money spent under the scheme.

Pronob Sen, who added the last committee to determine the index for wages under MGNREGA, said he favoured CPI (rural areas), as CPI (AL) was outdated. Consumption patterns had changed and CPI (rural areas) gave more weightage to horticultural and agricultural goods, which were important for rural workers, he told Business Standard. He agreed with Dev that no particular index could guarantee higher wages, as these kept changing.

The index should reflect rural consumption and needs more accurately, which CPI (rural areas) did, Sen said.

Both CPI (AL) and CPI (rural labourers) are estimated by the labour ministry and the Labour Bureau, while CPI (rural areas) is calculated by the Central Statistical Organisation (CSO).

The committee to determine a new index for wages also comprises activists Jean Dreze and Nikhil De and statistician K P Kannan, besides the director generals of the CSO and the Labour Bureau.

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First Published: Wed, November 27 2013. 00:49 IST