The government is in no mood to pare the wage rates under its flagship National Rural Employment Guarantee Scheme despite the strain on the exchequer, due to substantial hikes in minimum wages by states during the last two years and concerns that higher wage rates led to ineffective targeting.

States revise their minimum wages periodically, and as many as eight states increased their minimum wages substantially in 2007-08. Some, like Uttar Pradesh and Rajasthan, almost doubled it to Rs 100 a day from Rs 58. This had led to an escalation in the budget and also criticism that even households that were not really below poverty line (BPL) were queuing up for jobs under NREGA.

“The Minimum Wage Act is already in place and states notify wage rates. The Centre had decided not to fix the minimum wage earlier since states knew the local economy and were better placed to fix wage rates,” Rural Development secretary Rita Sharma told The Indian Express.

In fact, if one goes by the Congress manifesto for the recently concluded elections, the plan is to ensure at least 100 days of work at a real wage of Rs 100 a day for everyone as an entitlement under the NREGA. This would mean an additional requirement of Rs 21,600 crore for the programme on an annual basis.

The Centre had issued a notification in January this year, which in effect capped the minimum wages of individual states at levels prevailing as on January 1, 2009. “If states want to hike their minimum wage they are free to do so, but the programme will go by the wages as on January 1, 2009. The Centre can revise the rate if it is convinced by the individual state’s justification for a hike,” Sharma said. There was, however, no need to peg the NREGA wages lower than the marginal wage rates, she added.

... contd.