A review of the recent legal and political developments around NREGA and how in addition to its immediate effects on our poorest workers, affects the very democratic fabric of our country. An edited version published in Hardnews Magazine (January 2011)
It took 47 days of a protest sit-in in Jaipur to make the State budge. It’s notable that the objective of this protracted protest wasn’t to coerce the government for an extra share of State resources but to hold the government accountable to the Constitution and its own laws. The protest, “mazdoor haq satyagraha” was staged by workers employed under the National Rural Employment Guarantee Act (NREGA) to demand enforcement of their constitutional right to earn minimum wage. Even now after some initial encouraging signs, the matter seems to have stalled.
A Landmark Legislation
NREGA is the first social policy legislation in the entitlements framework – each worker gets ten entitlements (e.g., right to receipt on application of work, allocation of work within 15 days of application) and mechanisms to enforce implementation. For the first time, the government has been held accountable for non-performance (e.g., unemployment allowance if work not given in 15 days). Turning the mai-baap State on its head, holding it accountable to its people, rights-based legislations have the ability to politicize the population for a truly functional democracy. Already NREGA workers across the country are registering trade unions to mobilize and fight for their rights. There is immense potential in these unions – traditionally mobilization has taken place along divisive (and dead-end) issues like caste and religion – for political gain of vested interests but not politicization of the individual. Most trade unions are co-opted by political parties. Mobilization in response to immediate crisis like displacement tends to be localized – however NREGA unions can transcend these limitations, and these unions can be parlayed into building blocks of both broad-based politicization and pressure centers for equitable political reform.
But NREGA is not just about future lofty goals. It has already generated employment for more than 50 million women and men in 2009-10, empowered rural women, decreased rural-urban migration, created numerous productive assets, and increased depressed wage rates earned by the poor. But it is early days yet. Despite built-in transparency mechanisms, NREGA suffers from uneven implementation and endemic corruption. However the government, instead of doubling down to improve implementation given the undoubted immediate benefits and future transformative potential, is systematically undermining the very Act itself.
While the transformative potential of NREGA is in its framework, its attractiveness at the grassroots is in its two principal entitlements: 1) 100 days of work 2) at minimum wage – the two in conjunction ensure a minimum level of income enhancement for each rural family. NREGA wages can be fixed by the Central Government (Section 6.1), failing which, the wage rates default to the states’ minimum wage (Section 6.2). From August 2005 to January 2009, the Central Government did not notify any wage rate and state minimum wages were paid across the country.
As a result of NREGA, market wages increased everywhere as employers had to raise labor rates to keep up with NREGA wages, leading to widespread criticism by farmer groups of inability to find cost-effective labor. This actually indicates that state-mandated minimum wages were routinely flouted and in absence of law enforcement by the State, intervention at the market level was required to raise wage rates. Since the Center bears complete cost of wages, it is suggested that some states increased minimum wages in a bout of political opportunism, for instance right before elections. Therefore the Central government argues, to control its potential runaway spending, it capped the wage rate under NREGA at Rs 100 in January 2009. Thus despite the raging inflation of the past two years, the wage rate under NREGA remains frozen at Rs 100. Imagine digging hard soil for eight hours in 45 degrees sun to earn Rs 100, just enough to buy one kilo of arhar dal. To compound the frustration, even the Rs 100 can be arbitrarily reduced because as per work measurements, you didn’t work hard enough – in one shocking case, 99 workers in Tonk district (Rajasthan) were paid only Rs 1 per day for 11 days of work. As one Central government note said, NREGA work is subject to “rigorous measurements”. Indeed. Payment of wages too is routinely delayed for months beyond the mandated 15 days. It is almost certain that worker enthusiasm for the NREGA will wane.
Center’s argument of “budgetary predictability” is specious for three reasons: first, the Center could have base-lined wage rates as of Dec 31, 2008 and linked to inflation. This would have eliminated politically motivated wage rate increases by states but ensured that NREGA wages remained relevant in the face of inflation. Further, while it is true that some states did increase their minimum wage rates multiple times, even six months after Central government’s notification freezing rates at Rs 100, minimum wage in 20 states/UTs was less than Rs 100 per day. Finally at the time of the notification, states (e.g., Goa, Kerala, Haryana and Punjab) with minimum wage above Rs 100 accounted for an insignificant 2% of total expenditure under NREGA in 2008-2009. UP, which is a large NREGA funds beneficiary did raise its rates twice, but its wages were severely depressed at Rs 58, much below the 2007 national floor wage rate of Rs 80 (Central Government’s advisory rate, below which state governments are “persuaded” not to set their minimum wage rates). Third, state governments cannot increase minimum wage willy-nilly just because Central government is paying for one scheme – they are employers too and by increasing market rates, they are subject to pressure by industry and large farmer lobby groups.
Minimum Wage and Forced Labour
Today the minimum wage in nineteen states is higher than the wage rate under the NREGA, thus rendering the Act irrelevant to its very purpose – of enhancing livelihood security of the rural people – as villagers are able to earn more or as much in a more timely and predictable manner than under the NREGA. More importantly, by paying less than minimum wage, the State is breaking its own law, violating citizens’ fundamental rights and calling into question the very legitimacy of the government. This point was underscored in the letter (dated November 4, 2010) to the Prime Minister from Chief Minister of Andhra Pradesh in his opening paragraph, “I write this letter requesting compliance to the orders of the Honourable High Court of AP […] The order of the High Court was that Government being the agency for implementing minimum wages, cannot itself violate the minimum wages” (emphasis added).
In November 1948, the government appointed Tripartite Committee on Fair Wages defined three levels of wages: living wage; fair wage; minimum wage. Minimum wage is need-based to ensure the minimum needs of the workman. Thus with minimum wages set at bare survival, the employer is legally obligated to pay minimum wages regardless even of capacity to pay.
The Supreme Court, in multiple rulings, has held that non-payment of minimum wages is tantamount to ‘forced labour’ prohibited under Article 23 of the Constitution. Further the Supreme Court holds that ‘forced labour’ may arise in several ways, including “compulsion arising from hunger and poverty, want and destitution”. In Sanjit Roy Vs. State of Rajasthan (1983), the Supreme Court held that the Exemption Act in so far as it excluded the applicability of the Minimum wages Act 1948 to the workmen employed in famine relief work is “clearly violative” of Article 23. Thus even public works ostensibly initiated by the government for the sole purpose of providing employment are subject to the Minimum Wage Act.
Yet for the first time in almost thirty years after these rulings, the State is asserting not just the legal right to flout its own legislation, but also to exclude workers of the largest public works program in the world from the only protection unorganized workers have from exploitation. How is this happening?
Passing the Buck
Betraying its deeply anti-labour attitude, GoI first sought to legally establish that “implementation of the NREGA is not restrained by provisions of the Minimum Wages Act” . Thus when the CEGC, the statutory body to oversee the implementation of NREGA made an emergency recommendation to rescind the notification and reconcile NREGA wage rates with the Minimum Wage Act, the Ministry responded, “This is not feasible. The wage rates fixed under Section 6 (1) of the Act are distinct from the minimum wages. The provisions of the Act have to be respected.” However within six months of the notification, the Andhra High Court drawing heavily on the Supreme Court ruling on Sanjit Roy versus State of Rajasthan (1983), suspended the notification and decreed that AP minimum wages must be paid under the NREGA. Citing court order and flagging contempt in case of inaction, the AP government again asked the Center to notify the prevailing minimum wage rate under NREGA. Faced with legal fait accompli, GoI shifted its stand to assert that while minimum wage must be paid under the NREGA, the onus is on the state government (here AP) as the employer, with the Center obligated only to reimburse the amount notified by it! A reasonable defense against this argument is that NREGA is an Act, passed on the belief that the Center will bear the complete cost of labor. Attempting to subsequently shift an increasing component of labor cost over time to the state governments goes against the federal nature of the government.
Sure enough, the State governments argue that this is a Central scheme and as per Section 22(1)(a), the Central government shall meet the cost required for payment of wages for unskilled manual work under the Scheme. Therefore they will only pay the wage rate set and paid by the Central government, even if prevailing minimum wage in the State is more.
As per documents obtained under the RTI, the Labour Ministry is unequivocal: “There cannot be a wage rate less than the minimum wage rate in any circumstances”. The Law Ministry is similarly unambiguous: as per the provisions of the Act, the Center government must bear the full cost of wages paid under the NREGA. There is no quandary – the Center must bear the cost of the prevailing state minimum wages for work done under NREGA. Yet the one and a half year old stalemate and contempt of an existing High Court order continues.
The Fine Art of Stalling
The State is in contempt of a court order. But the MoRD minister, CP Joshi is unfazed – he falsely claimed that the government had obtained a Supreme Court stay against the High Court order. Commenting on this situation, former Chief Justice of the Delhi High Court, A.P. Shah said, “Where is the rule of law if the government can so easily violate a court order? The government has been in contempt for more than one year, which virtually means that the common man has no legal remedy against the State”. When confronted, the minister now says that he is waiting for the “final judgment of the High Court as its existing order was ambiguous about the Centre’s powers to fix MNREGS wages”. But when the counsel, Murthy, for the labour group petitioners in the AP court was contacted, he responded that on every hearing post the HC order, the governments keep requesting for an adjournment because they “need more time”. Clearly the Government’s focus is on procrastination, not elucidation.
There is another important question on the democratic credentials of the Government. The Labour Ministry is fully seized of the blatant and large-scale violation of the Minimum Wages Act by Central and state governments. One of the main functions of the Labour Ministry is to protect unorganized workers by enforcing labour laws and ensuring payment of minimum wages. Why is it not taking any action?
Meanwhile, with wages frozen at hundred rupees and falling nominal value, this game of pass weighs heavy on daily wage workers on the edge of subsistence. If either the state or central governments were less callous, they would ensure that the workers were paid their just wages even while the dispute was being worked out. In fact state governments should just pay the prevailing minimum wage rate from the Central funds released under NREGA since they have both the Constitution and Supreme Court on their side. The Central Government could theoretically withhold funding but is unlikely to, given the adverse political fallout and untenable legal position. This callousness is in stark contrast with the State’s solicitousness with the powerful – state functionaries by virtue of ability to stall government functioning and corporate India by its ability to bankroll the former. This year, MPs raised their own salaries threefold; dearness allowance for the bureaucracy was hiked an additional ten percent from 35% to 45% and in the 2009-2010 budget, the corporate sector got direct subsidies over Rs 500,000 crores, equivalent to almost 80% of aggregate tax collection.
A legitimate question is why would the government sabotage its showpiece legislation, widely credited as being pivotal in returning UPA to power in its second term. NREGA epitomizes an emerging class of social policy legislation, which is rights-based (universal application thus the beneficiary self-selects); requires state intervention either for delivery of state services or mediation; and holds the state accountable to the citizen. Thus NREGA is open to all rural persons willing to do unskilled manual labor. The State provides employment, and by virtue of its scale effectively raises wage rates in the labor market. Finally through built-in transparency and penal provisions, the government is held accountable for both performance (timely employment, payment) and accounting (open muster rolls, social audit). This form of governance – large role of State, redistributive stance, grassroots political activism for state accountability – is firmly on the far left of the ideological dvide.
However, there are clear signs that the Government wants to retreat for greater privatization in all spheres of the economy. Finance Minister, Pranab Mukherjee in his Budget 2010-11 speech said, “With development and economic reforms, the focus of economic activity has shifted towards the non-governmental actors, bringing into sharper focus the role of Government as an enabler. An enabling Government does not try to deliver directly to the citizens everything that they need”. Thus in keeping with the expressed ideology, the government is actively pushing the citizen towards becoming a consumer in a market economy as opposed to a citizen in a political framework – as denoted by subsidy cash transfers in lieu of the State itself providing affordable services to the citizen. This is most obvious in the current struggle between the Right To Food Campaign and the Planning Commission, with the latter advocating dismantling PDS in favor of direct cash transfers to the citizen, to use for purchase of grain in the market. However, Government efforts in this direction are impeded by the immense grassroots popularity of the NREGA, evident not just in UPA’s electoral triumph but also by the groundswell of mobilization for the proper implementation of the Act. Even its most neoliberal critics attribute the relatively moderate effects of the global financial meltdown on India on the resilient rural economy, attributable in part to the NREGA wage transfers. In the face of such popularity, the government of the day has little choice but to steadily undermine the program itself as opposed to scrapping it outright.
Privatization of community resources and delivery of essential services is antithetical to the growing rights-based movement in the country. In the ongoing discussion on the food security bill, the Planning Commission is advocating cash transfer of only the subsidy amount, around Rs 80 per month for one individual. With cash transfers set at or below subsistence level and privatization of service delivery, large sections of the populace will be systematically denied the opportunity to participate in the country’s economy except as low-end consumers. Democracy, the right to participate in the country’s functioning cannot be degraded into mere consumption, especially not in a poor country that claims to be the world’s largest democracy. Conversely rights-based movements are fundamental to democracy – in that they provide a platform for people to engage with the State and thus participate in their own governance. There is another serious implication – by moving the citizen from an entitlement to a cash dole, the government is creating grounds for ultimate pruning of the program itself. Soon someone will be up in arms about the rising fiscal deficit and the need to “rationalize” government spending. Cash transfers will be deemed a fiscal drain on an unproductive part of the populace, and will be subject to erroneous targeting, delinked from inflation, made conditional… – essentially inverting the state-citizen relationship – ironically holding the citizen accountable to the State instead of the other way round as expected in a democracy.
The situation has come to a head. 77% (~836 million) of India’s population lives on less than Rs 20 per day and we are home to the largest number of hungry people in the world. At the same time, the number of billionaires in India has gone from 27 in 2008 to 69 in 2010; the combined wealth of the richest 40 accounts for almost a quarter of our GDP. No society can sustain these levels of inequality without starting to fragment. It is the duty of the State to ensure a minimal level of human dignity for its populace. Instead by throwing our poorest to the ravages of a market economy, we have commoditized them. People’s groups across the country are resisting peacefully, democratically in an effort to defend their legitimate right of sovereignty, participation and due process. Yet the State has remained callously indifferent. It is but obvious that some of this peaceful dissent will erupt in violence in an effort to amplify its voice and engage the State. We see this already in the growing Maoist influence, now covering almost one third of the country. If we hold dear the ideals of a democratic State, it is up to us now to engage and ensure that the State represents our collective good intentions and not the narrow interests of the few.
Note: Download documents mentioned in this piece here
 The dharna was lifted after the Rajasthan state government acceded to the worker’s demands on five issues, principal amongst which was linking state minimum wage with inflation. On the demand from the Center regarding the payment of minimum wage under NREGA, the dharna was lifted on assurance of action derived from a letter by Mrs. Gandhi to the PM. In its last press release, the workers noted, “With the endorsement of our stand by Mrs. Gandhi, Chairperson of the NAC and the UPA, we are assured that the rights of the workers will be respected, and the Central government will urgently issue necessary orders in line with suggestions made by Mrs. Gandhi” . However action by GoI on this demand is still pending
 For states already paying more than Rs 100, the Central government capped wages at wage rate as of Dec 31, 2008.
 Andhra Pradesh, Andaman & Nicobar, Bihar, Chandigarh, Dadra & Nagar Haveli, Goa, Haryana, Himachal Pradesh, J&K, Jharkhand, Karnataka, Kerala, Madhya Pradesh, Maharashtra, Mizoram, Pondicherry, Punjab, Rajasthan, Uttaranchal (Source: MoRD presentation dated October 22, 2010)
 See section “Passing The Buck” for more on the case
 A week later (November 11, 2010) in the absence of any favorable response by the Executive, the Chairperson, NAC (and UPA, ruling government) wrote to the Prime Minister quoting the same paragraph from the CM’s letter to highlight the urgency of the matter
 Ministry of Law and Justice note dated January 1, 2008
 Minimum wage in Goa is higher than the amount reimbursed by the Center (Rs 157, Rs 110 respectively); state government pays minimum wage under NREGA bearing the difference (Rs 47) out of its own exchequer. Labor groups in two states, Andhra Pradesh and Karnataka are litigating against payment of less than minimum wage under NREGA. The AP High Court suspended the GoI notification on grounds of unconstitutionality in its order dated July 3, 2009; however, NREGA workers continue to be paid less than minimum wage
 Budget 2009-2010, Table 12 (Revenue Foregone in financial years 2008-09 and 2009-10)