Can MGNREGA Be Reshaped and Reoriented to Help India's Farmers?

As a fresh spotlight hits India's rural employment programme, two suggestions have been offered to “repurpose” MGNREGA to utilise the additional labour force that have returned to their villages.

Due to the sudden lockdown and resultant job losses, over one crore people have returned to their homes, some walking hundreds of kilometres, others using all conceivable means of transport – buses, trucks, trailers, concrete mixers, Shramik trains, motorcycles, scooters, bicycles, auto rickshaws, cycle and trolly rickshaws and even boats.

Many of them may be so upset psychologically with the travails they had to face that they choose not to return at all. A sizeable number may take several months to return to the cities and towns to earn a living.

This extraordinary scenario of a pandemic poses a formidable challenge for the governments of the ‘home states’ to arrange suitable job opportunities for securing their livelihoods. While some state governments, most notably Uttar Pradesh, are claiming to map their skills to productively engage them in the small and medium enterprises (SMEs), others are facilitating their absorption in the rural economy through farm operations.

In this bleak scenario, the much-criticised MGNREGA is providing a ray of hope. In this context, two suggestions have been offered to “repurpose” MGNREGA to utilise this additional labour force.

First, there is a suggestion to use it to meet the wage cost of their employment in small and medium enterprises (SMEs). Accordingly, skilled migrant workers may be placed in SMEs and their wages would be charged to MGNREGA. In a recent article, published in the Indian Express, Kulkarni and Ambasta have cogently discussed this proposal and have argued that it does not merit consideration.

The second suggestion, examined by a committee of seven chief ministers, under the aegis of the NITI Aayog, is to allow farmers to employ MGNREGA workers in agricultural operations like land preparation, sowing, transplantation of paddy, plucking of cotton, intercultural operations and harvesting of crops etc. so as to reduce the cost of cultivation. The idea is to pay part of wages of labour in agricultural operations from MGNREGA.

In the last few years, un-remunerative prices of several crops have been the root cause of widespread agrarian distress. This can be alleviated by substantially raising the MSP of crops or by reducing the cost of cultivation or by increasing the crop productivity. The first option is ruled out since this will be highly inflationary and if it is completely divorced from domestic and export demand, it will hit the export competitiveness of several commodities (e.g. rice, cotton, sugar). The procurement of wheat, rice, pulses and cotton at prices fixed by the government is already being seriously contested in the WTO by several developing and developed countries. The fair and remunerative price (FRP) mechanism for sugar is also under challenge.

So, the option of reducing the cost of cultivation, by reducing labour cost, looks attractive for enhancing farmers’ earnings. For several crops, the labour component is quite high in the cost of cultivation. For example, in sugarcane, labour cost accounted for 56.6% of the total cost of production (A2+FL) in triennium to 2016-17.

Also read: Fact Check: How Many MGNREGA Wage Arrears Did the Government Really Clear?

However, there are at least three reasons why this is not a sound idea.

First, the MGNREGA 2005 mentions that one of its core objectives of MGNREGA is to create durable productive assets (Clause 3 of schedule I of the Act). Further, in clause 4(3) of the same schedule, it is expressly mentioned that works which are non-tangible, not measurable, repetitive such as, removing grass, pebbles and agricultural operations, shall not be taken up. Thus, the employment of MGNREGA workers for farm operations is not within the provisions of the Act.

Secondly, MGNREGA is, by its legislative intent, is expected to provide supplementary employment to rural households, especially the landless households largely dependent on manual labour for sustenance. This is in addition to the work available in the agricultural operations. This is why MNREGA provides for only 100 days of employment.

If MGNREGA workers are allowed to be paid for agricultural operations, the overall demand for labour in the rural areas will shrink. In many states, such works are not carried out during sowing and harvesting periods. Due to the impact of the COVID-19 induced lockdown, there is additional labour in poorer states and many of the migrant workers may also seek employment in MGNREGA. As per a CMIE report, 12.2 crore jobs were lost in April 2020 alone. As a result, rural wages, which had registered muted growth in recent years, are likely to further go down, especially in states which have witnessed large influx of migrant labour.

In such a scenario, using the lower wage structure of MGNREGA (than market rates) to work on private farms will push the wages further down. Moreover, it will also give undue power and influence to large farmers, who mostly belong to the dominant castes while most labour belong to SC/ST/OBCs.

The third reason for not changing the foundational structure of MGNREGA is that the programme already has several features which directly support the farm sector. Proviso to clause 4(2) of the Act, inserted through an amendment in July 2014, specifically mandates that at least 60% of the expenditure in a district shall be for creation of productive assets, directly linked to agriculture and allied activities, through development of land, water and trees. Accordingly, a variety of works for improving land productivity, water harvesting and irrigation, production of organic manure, horticulture, individual as well as common infrastructure for promotion of livestock and fisheries, and post-harvest facilities for storage of agro-produce in the villages can be taken up.

Also read: Once Derided by Modi, Boost to MGNREGS Shows it’s One of Rural India’s Few Safety Nets

MGNREGA guidelines already allow payment of wages for certain works (e.g. digging of tanks) on the land owned by SC/ST and small and marginal farmers. Therefore, these vulnerable groups of farmers, who do not have easy access to credit from institutional sources, are already permitted to use MGNREGA for undertaking such investment to augment productivity of their livelihood assets.

As a result of this amendment in July 2014, expenditure on agriculture and allied works under MGNREGA has consistently exceeded 60% of total expenditure, since 2015-16.

The answer for reducing labour cost of farmers in relatively richer states is mechanisation. For ensuing kharif operations in 2020, either the farmers in these states will go for more mechanisation or they will have to get migrant labour back by paying them higher wages and better facilities.

Some studies have found that the quality of agricultural work on farmers’ fields has been quite good. Bhaskar and Yadav (2015), through a well-designed study, have documented that MGNREGA wells in Jharkhand had impressive returns of 6%. In a more recent survey conducted by the Institute of Economic growth covering 30 districts spread over 21 states and 14 agro-climatic zones, productivity growth of about 12% for rice and wheat, 16-17% for bajra, maize, pulses and oilseeds was reported.

On looking at all the considerations, we are persuaded to argue that the proposed repurposing of MGNREGA to meet part of expenditure on labour for recurring agricultural operations would not be justified for promoting efficiency nor would it enhance equity.

Also read: As Poverty Spikes Due to Lockdown, A Separate Package for Urban Distress is Urgently Needed

In the past, MGNREGA has attracted criticism on the grounds that that it is an inefficient instrument of shifting income to the poor as it costs Rs 5 to transfer Re 1 to MGNREGA workers. This was based on the explicit assumption that leakages were as high as 25% and the assets created had no value. A recent study by Muralidharan et al (2017) shows that the programme raised households’ earnings by 13%, leading to a 17.4% reduction in income poverty.

There is no doubt that MGNREGA is still grappling with some critical implementation hurdles, notably quality of work in states, particularly those where panchayati raj institutions are weak and there are long delays in disbursement of wages. Since the adverse impact of the COVID-19 pandemic on employment is going to persist in 2020-21 and the government does not seem to be considering direct cash assistance, what is warranted is more effective implementation and strengthening of the oversight of MGNREGA through mandated social audit.

At this point in time what is needed is neither dismantling of the programme nor its slow suffocation.

Siraj Hussain retired as Union Agriculture Secretary and is now a Visiting Senior Fellow at ICRIER. Jugal Mohapatra is a former Union Secretary of Rural Development.