Why PM may not win tussle with Jairam on NREGA wages

Like the fictional boy who put his finger in the dyke to save his town from flooding, Prime Minister Manmohan Singh has put his finger in to stop the government’s social sector schemes from bleeding the budget dry. But unlike the boy, Singh does not look like he will succeed. Tuesday’s newspapers ran headlines saying that the Supreme Court has refused to stay a Karnataka High Court order which held that the centre’s Mahatma Gandhi National Rural Employment Guarantee Scheme (MNREGS, a.k.a. NREGA) should pay at least minimum wages. The states are happy to demand minimum wages for NREGA work, for it is the centre footing the bill. The PM does not want the states having a free lunch at his cost, but in the process he has got into a tangle with his own Rural Development Minister Jairam Ramesh. [caption id=“attachment_192346” align=“alignleft” width=“380” caption=" The Supreme Court has refused to stay a Karnataka High Court order which held that the Mahatma Gandhi National Rural Employment Guarantee Scheme should pay at least minimum wages. “] [/caption] According to DNA newspaper, Ramesh was not in favour of challenging the Karnataka court order, but the PM forced him to move a special leave petition (SLP) in the Supreme Court saying NREGA can pay wages that are different from state-level minimum wages because the former is a social security scheme. While Ramesh was keen to comply with the Karnataka High Court order of 23 September, knowing full well that he would have the backing of Sonia Gandhi, the PM was clear this could not be done. Backed by the finance minister and Planning Commission Deputy Chairman Montek Singh Ahluwalia, the PM held his ground. Ramesh apparently wrote two letters to the PM – one on 30 October and another on 12 December – saying it would be better to pay minimum wages. But the PM, worried about repercussions elsewhere and the impact this would have on the budget deficit – already spinning out of control at over 5.6 percent of GDP – told him to back off. DNA notes: “In a sharp letter on December 19, Singh finally ‘ordered’ Ramesh to file an SLP and ensure that another ongoing case in the Andhra Pradesh High Court did not result in an absolute order that would prove embarrassing to the UPA.” However, filing the SLP is one thing, winning the case is quite another. The Supreme Court, once it hears the government’s case, could decide not to go along with the government’s official stand of not aligning minimum wages in states with wages paid under NREGA schemes. The PM’s unstated reasons are easy to decipher. One, NREGA, which has a budgeted outlay of Rs 40,000 crore this year, is intended as a safety net for those without work, and not a replacement for regular work – which is what the states’ minimum wages laws are meant to regulate. Two, NREGA wages are already indexed to inflation. Three, and most important, the centre’s fiscal deficit is set to overshoot by a very large margin this year, and next year it could be worse, with the Food Security Bill in the process of being legislated. Food subsidies are already overshooting the budget target of around Rs 60,000 crore by a wide margin. So are fertiliser subsidies , from just under Rs 50,000 crore to possibly Rs 95,000 crore. Oil subsidies could be a record, with oil marketing companies reporting under-recoveries of Rs 1,40,000 crore in 2011-12. The budgeted borrowings are being exceeded by Rs 93,000 crore even without taking a big chunk of these threatened slippages into account. The last thing the government needs is for NREGA to punch another hole through the budget, thanks to its realignment with minimum wages. In all past battles with the social agenda, the PM has usually lost. On farm loan waivers, on indexing NREGA wages to inflation, and on the Food Security Bill. What’s the bet that he will win this one? If the court does not do it, Sonia Gandhi might. After all, compared to the prize of winning the next general election, what is another loss of Rs 1,000-and-odd crore to pay minimum wages to NREGA beneficiaries? It’s chickenfeed. Manmohan’s finger in the subsidy dyke won’t save the budget anyway.