1/21/2011

States to bear cost of aligning NREGA …

Fri, Jan 21, 2011 | Updated 11.31AM IST

19 JAN, 2011, 01.53AM IST,ET BUREAU

States to bear cost of aligning NREGA wages with minimum pay: Montek
NEW DELHI: The Planning Commission has said that states will have to bear the additional burden if the minimum wages notified by them are higher than that fixed by the Centre for work under the employment guarantee Act.

In the case of rich "states that can afford very high minimum wages, the central government reimbursement will be limited", Planning Commission deputy chairman Montek Singh Ahluwalia told reporters.

For a state where minimum wages are below that or close to that (prescribed under MGNREGA), it is not a problem, he said.

The clarification comes amid increasing pressure on the government to link wages paid under the Mahatma Gandhi National Rural Employment Guarantee Act, of MGNREGA, to minimum wages.

Under the Act, a worker is entitled to 100 a day for minimum of 100 days in a year.

The government recently decided to benchmark MGNREGA wages to inflation, which will push up remuneration between 17% and 30%, to ensure that wages rise in line with inflation.

The government, however, does not want to link MGNREGA wages to minimum wages. States will then hike their minimum wage rate arbitrarily knowing that the burden will fall on the Centre.

Under the provisions of the Minimum Wages Act, 1948, both the central and state governments can fix or revise minimum rates of wages for workers engaged in different scheduled employment under their respective jurisdictions.

The concern was that states could raise the minimum wages to some unreasonably high level and enforce it just for MGNREGA, Mr Ahluwalia said.

The Centre is currently insulated from competitive populism of states in respect of the employment guarantee scheme as the law gives it the power to fix task-based wage rate.

"Notwithstanding anything contained in the Minimum Wages Act, 1948 (11 of 1948), the Central Government may, by notification, specify the wage rate for the purpose of this Act," section 6 (1) of the Act says.

The Centre has budgeted 41,000 crore spend for the scheme in the current year, which is expected to rise further because of linking wages to inflation.

Economists have warned that even the current higher wages will stoke inflation further.

" Higher rural wages should act as another tailwind for rural consumption demand, but will likely fan inflationary pressures," said Sonal Varma, economist for Nomura in a note.

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States to bear cost of aligning NREGA …

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