News Analysis

Why the wage increase under MGNREGA does not offer any meaningful respite

Radhika Merwin BL Research Bureau | Updated on March 31, 2020

Representative image   -  Mohd Arif;Mohd Arif

Sangaralingam Ramanujam, director of the Jayankondam Collective Farming Producer Company in Tamil Nadu’s Kundaveli Ariyalur District, played a key role in opening bank accounts for people in his village under the Jan Dhan scheme. However, the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGA), he says, has been a disappointment in his village. The scheme, which promises 100 days of work a year to each rural household at a pre-determined minimum wage rate, has seen poor activity there, owing to the low volume of work over the past few years.

The lockdown to stem the COVID-19 outbreak has brought even the minimal work to a grinding halt, he says. How then can the Centre’s announcement of a ₹20 per day increase in the average wage under MGNREGA (as part of the Pradhan Mantri Garib Kalyan Yojana) amount to any significant relief, if other States are riddled with similar challenges?

What’s more, the wage increase that was unveiled under the PM Garib Yojana was already notified by the Ministry of Rural Development earlier on March 23, as part of the annual exercise of wage revision for each state under MGNREGA. In fact, the wage figure of ₹202 per day (increased from ₹182 per day) referred to by Finance Minister Nirmala Sitharaman, is only an average national figure and conveys little. For most of States the notified wage rate for FY21 is actually over ₹220 per day.

Hence how daily-wage earners under MGNREGA are paid during the 21-day lockdown and how much employment can be generated in the months ahead is a critical challenge that the Centre and State governments have to grapple with.

Not adding up

There are several points in the FM’s wage increase under MGNREGA that do not add up.

One, the wage figure of ₹182 for FY20, is an average number arrived at based on individual states’ ‘average wage per personday’, according to the MGNREGA website. This average depends on the notified wage rate and the number of persondays of work (employment provided) for each state. Hence the average of ₹182 does not convey much. In fact, ₹182 is much lower than wages paid in most of the states (due to lower amount of work in particular states or due to delay in payments).

Consider this. The wage rate notified for FY20 for most states was above ₹190 per day—as high as ₹284 in Haryana, ₹271 in Kerala, ₹249 in Karnataka, ₹241 in Punjab and ₹229 in Tamil Nadu.

Sangaralingam Ramanujam says that providing such high wages in effect lowers availability of manpower for other agricultural activities in the village and is a huge problem. “Most of the times, people just sit around and are paid high wages for very minimal work.”

But that’s under normal circumstances. Now with the lockdown in place, and work halted, increase in MGNREGA wages does not offer any respite to the villagers, says Sangaralingam.



A ₹20 wage increase, really?

If the ₹182 national average wage rate that the FM referred to is an erroneous figure to look at, then the ₹20 per day increase that was announced with much hype also does not show the big picture.

The notified wage rate for FY21, announced on March 23, before the PM Garib Yojana, is way above ₹202 per day for most States. In fact many States, including Gujarat, Haryana, Andhra Pradesh, Karnataka, Tamil Nadu and Maharashtra, have seen the notified wage rate increase by ₹25-32 per day in FY21 (vs FY20). The notified wage rate for FY21 for States such as Maharashtra (₹238 per day), Tamil Nadu (₹256), Karnataka (₹275), Andhra Pradesh (₹237), Haryana (₹309) -- is way above the ₹202 a day figure (again a national average based on employment generated in FY20) that the FM mentioned.

How much work is generated in FY21 in each State will be a more important factor to look at, as in FY20 there has actually been a 2 per cent decline in employment generated, as against FY19 (in terms of person-days).

Finally, the FM stated that the wage increase would lead to a ₹2,000 increase for a worker annually (₹20*100 days). This simplistically assumes 100 days of work. But over the past five years, the average number of days of employment provided per household has been 45-50 days. In FY20, of the 5.4 crore households that worked, only 37 lakh households completed 100 days of employment.

Operational issues

Sangaralingam is all praise for the Jan Dhan scheme, under which accounts were opened at lightning speed, at zero cost, and benefits under various government schemes were transferred directly and seamlessly into the accounts.

But the recent announcement of cash transfer of ₹500 per month (for three months) to women Jan Dhan account holders, and ₹2,000 to farmers under PM Kisan, could pose operational challenges. “Most bank branches are closed in the lockdown, and it is unclear how villagers will be able to withdraw the cash transferred by the government. Most shops are shut and people are managing with what little they grow in their backyard,” says Sangaralingam.

Even if the government decides to pay MGNREGA workers during the 21-day lockdown, accessing cash and buying essential food items will be a challenging task for the villagers. “Distributing food at the doorstep to job card holders under MGNREGA may be more useful,” says Sangaralingam, for whom a three-acre watermelon field is a total loss this season, as he is unable to harvest or sell his produce amid the lockdown.

Published on March 31, 2020

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