Just a month-and-a-half after it extended the National Rural Employment Guarantee Scheme (NREGS) to all districts of the country, the UPA government’s pet scheme is showing the first signs of slowing down. According to reports, succumbing to pressure from the Prime Minister’s Office (PMO), the Rural Development (RD) Ministry has directed state governments to adopt uniform wages. At present, the states have the power to decide the rates and these are linked to the minimum wage rate that the states set for unskilled agricultural workers. Therefore, wage rates of the job scheme vary from Rs 60 to Rs 125. Of late, there were murmurs of freezing the wage rates at the current levels.
It seems that the decision to fix the minimum rate, which is well within the central government’s purview, was probably a result of two issues: first, the Union government probably senses an increasing competition among states to hike the minimum wage rate in an election year, especially the non-Congress ruled states, and second, the need for fiscal belt tightening. Activists had argued that the Rs 16,000 crore which was allocated for the scheme in this 2008-09 Budget would fall woefully short. They estimated that to make the NREGS effective, the government needs to spend at least Rs 40,000-Rs 50,000 crore. Most say making wage rates uniform goes against the grain of the Minimum Wage Act and it would not be sensitive to the consumer price index.
The most important issue is still whether the move to a uniform wage rate will improve the performance of the scheme. There have been reports that not many people are earning even the minimum wage because the schedule of rates — which determines productivity norms — don’t take into account regional, climatic and gender-related variations. In other words, most workers do not manage to get what is due to them because of these unrealistic norms. Moreover, what would happen if the uniform wages were higher than those in agriculture? Wouldn’t farming operations suffer? The prospect of uniform wages being less than agricultural wages is not good for NREGS either. Clearly, it is important to fix the various problems of this landmark scheme, including corruption, rather than tinker with rates at this moment.