The finance ministry has after four years of inaction expressed “in-principle” endorsement rather than clear support for a proposal that would have ensured sharper yearly wage increases under the rural job guarantee scheme.
A disappointed rural development ministry, which manages the programme, is now in a quandary whether to go ahead and change the scheme’s existing wage-revision formula without a commitment from the finance ministry for more funds.
In 2015, a government-appointed expert committee headed by economist Mahendra Dev had recommended that the scheme switch from the Consumer Price Index for Agricultural Labour (CPI-AL) to CPI-Rural to calculate the yearly wage revisions. A panel of bureaucrats later supported the idea.
Both committees highlighted that the CPI-AL, prepared by the Labour Bureau, a labour ministry arm, uses a 30-year-old module relating to the items of consumption and the weight accorded to each.
Taking 1986-87 as the base year, the index links 40 per cent of a labourer’s expenditure to cereals — which are cheaper than most other kinds of food — on the ground that rural people have a high intake of rice or wheat.
Also, the CPI-AL gives only 0.41 per cent, 4.38 per cent and 1.67 per cent weight, respectively, to the education of the labourer’s children, health care of the family, and transport, said Rajendran Narayanan, a researcher on the rural job scheme.
In contrast, the CPI-Rural, prepared by the Central Statistical Office under the ministry of statistics and programme implementation, uses a more updated basket of consumption items.
It gives only 19 per cent weight to cereal consumption, mindful of the change in the pattern of cereal intake by rural people. It gives 2.71 per cent, 6.72 per cent and 5.83 per cent weight to education, health care and transport.
Sources said a formula based on the CPI-Rural is likely to raise wages by an additional five to six per cent compared to one tied to the CPI-AL.
The Centre spends about Rs 60,000 crore annually under the Mahatma Gandhi National Rural Employment Guarantee Act, which provides for up to 100 days’ paid work a year to every rural household. The wages account for about Rs 45,000 crore out of this.
This means that adopting a formula based on the CPI-Rural would raise the government’s wage bill by Rs 2,000 crore to Rs 3,000 crore a year.
Wages under the rural job scheme for a particular year are calculated by comparing the CPI-AL for the preceding December with that for the December before that.
In 2019, the rural job scheme wages did not witness any increase in Bengal, Kerala, Karnataka or Goa because the CPI-AL was flat or negative for these states in the month of December 2018 over the corresponding month of 2017.
“This year the rural development ministry has saved money on some other expenditures and can divert it to the rural job scheme. So, it can afford to switch to the CPI-Rural even without additional funds from the finance ministry,” a senior government official said.
“But if the formula has to change permanently, the finance ministry has to give a clear-cut ‘yes’ instead of just an ‘in-principle’ agreement, and provide the additional funds.”
Narayanan, the researcher, said the government should switch to the CPI-Rural at least from 2020.
One ray of hope is the Labour Bureau’s decision to update the CPI-AL, although this revised version may not raise the wages to the level the CPI-Rural is expected to, an official said.
He said the rural development ministry had recently written to the Labour Bureau seeking details of how the CPI-AL would be updated.
“The updated CPI-AL series will be ready by 2021,” a labour ministry official said.
Earlier this month, the parliamentary standing committee on rural development had met rural development ministry officials and expressed “displeasure” at the poor wage revisions for the rural job scheme.
Nearly 10 core job-card holders seek work under the scheme every year.