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States have to bear extra NREGA burden: Plan panel

Last updated on: January 18, 2011 17:25 IST

Montek Singh AhluwaliaThe Planning Commission said on Tuesday states will have to bear the additional burden of payment towards employment guarantee scheme MGNREGA beyond the amount prescribed by the centre to match their minimum wages.

"Any state whose minimum wages are below that or close to that (prescribed under MGNREGA), then it is not a problem.

"But if you are a very rich state that can afford very high minimum wages, then Central government reimbursement will be limited," Planning Commission Deputy Chairman Montek Singh Ahluwalia told reporters.

Under the Mahatma Gandhi National Rural Employment Guarantee Act, a worker is entitled to Rs 100 per day for minimum of 100 days in a year.

Later, it was decided to link the payment to inflation.

As per the revised structure (post linking it to inflation), the wages under MGNREGA will go up between 17 to 30 per cent on the base of Rs 100 for the present, a move that will benefit 5 crore (50 million) people.

However, under the Minimum Wages Act, the wages are fixed by the states and these vary from state to state.

Ahluwalia has said if the minimum wage in state is higher than compensation prescribed under the MGNREGA scheme, the state should bear the additional burden.

"The idea (behind the scheme) was that the Centre will reimburse up to Rs 100 per day (plus additional after linking it with inflation)," he said, adding that problem occurs in those states which have higher minimum wages than what has been specified under the Act.

"Over a period of time, many states have revised their minimum wages upward with some having minimum

wages above the Centre specified level" he added.

The concern of the Centre, he said, "is what happens if in a state, they just raise minimum wages to some unreasonably high level. They don't enforce it on their own work but just enforce it on MGNREGA".

Earlier this month, the government firmed up an indexing system of minimum wages for various categories of labour to match the inflation.

Sonia Gandhi, in her capacity as National Advisory Council chairperson, had written to Prime Minister Manmohan Singh, saying that the wages of labourers should be linked to Consumer Price Index to ensure that they are protected against the inflation.

Gandhi had also said that the payment of minimum wages by the states as prescribed under the Minimum Wages Act should be ensured under the MGNREGA.

In his response, Singh has explained that the Minimum Wages Act and MGNREGA were two separate dispensations, providing for different wages.

The minimum wage under MGNREGA had been fixed at Rs 100 as on January 1, 2009, irrespective of what the states were paying under Minimum Wages Act.

This was more than what was being paid by the states.

Subsequently some states increased the wages beyond Rs 100, leading to a new situation which was discussed by the NAC, prompting Gandhi to write to Singh.

Image: Montek Singh Ahluwalia

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