Using MGNREGA Funds to Subsidise Farm Labour is a Recipe for Disaster

At the recent fourth governing council meeting of the NITI Aayog, the government announced the formation of a sub-group of chief ministers to propose ways of linking the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) with agricultural activities.

The group is headed by the chief minister of Madhya Pradesh, Shivraj Singh Chouhan, and includes Mamata Banerjee, Vijay Rupani, Nitish Kumar, Yogi Adityanath, N. Chandrababu Naidu and Pawan Kumar Chamling.

The formation of the committee came in the context of discussions on how to double farmers’ income by 2022, a bold (and highly unrealistic) electoral promise of the BJP in 2014.

It is not very clear what the government is proposing, but by looking at the ‘tentative’ terms of reference of the sub-group it seems that the real issue at stake is to allow state governments to use MGNREGA funds to subsidise the wages of agricultural labourers working on the private land of farmers.

This would, on the one hand, turn the MGNREGA from a rather successful anti-poverty programme that has contributed significantly to empower the most marginalised sections on India’s society into a scheme aiming at restoring highly unbalanced power relations in favour of large farmers (often belonging to the locally dominant castes).

On the other hand, it would not solve or even contribute in any significant way to reduce farmers’ distress.

It is worth looking at the list of issues that the sub-group will analyse point by point.

First, the committee will “suggest a wider choice of state-specific interventions both for pre-sowing and post-harvest to further improve the thrust on incomes, water conservation and waste to wealth”.

Second, the sub-group will propose ways ‘to align works under MGNREGA fully to the requirements of achieving the goal of doubling farmers’ income by 2022. This will improve thrust on water conservation, individual beneficiary schemes, construction of rural haats, vermi-composting etc.’

Both these measures seem to be little more than expanding the list of permissible works under the programme. In fact, according to Schedule I of the MGNREGA, district coordinators must ensure that at least 60% of the works taken up under the programme must create productive assets ‘directly linked to agriculture and allied activities’.

It is thus not clear why a sub-group of chief ministers is needed to amend the list of works that can be executed under the programme, as most of them must be linked to agriculture anyway

It is similarly unclear why chief ministers should use their time – in an election year – ‘to explore the possibilities of MGNREGA as a livelihood resource for development and diversification of livelihoods of small and marginal farmers specially belonging to SC/ST households’.

Again, in many states, it is already possible to utilise MGNREGA funds to develop the land of marginal farmers belonging to SCs and STs. While additional ways to increase the productivity of marginal farmers would certainly be welcome, this could be left to the state governments to decide, as it is currently the case.

The real task in front of the sub-group seems to be formulation of “recommendations on interventions of MGNREGA that can facilitate reduction of agrarian distress including work availability, wage rates, seasonality etc.”.

In his remarks, NITI Aayog vice-chairman Rajiv Kumar noted: “The committee would examine the feasibility of using the employment generated under the Mahatma Gandhi National Rural Employment Guarantee Act in agriculture-related activities both pre-harvest and post-harvest”

In other words, it seems that the government has finally capitulated in front of a long-standing demand of farmers’ representatives, namely to use MGNREGA funds to subsidise the wages of agricultural labourers employed on the private land of farmers.

This is a recipe for disaster.

Upward and downward pushes

One of the key reasons why the MGNREGA – a ‘stellar example of rural development’, according to a World Bank study –  has made such a profound impact on the lives of India’s rural dwellers is precisely because it gives them an alternative source of employment, thus reducing their dependency on large farmers for their livelihood. This has had many important consequences.

First, it pushed agricultural labourers’ wages up, as farmers had to at least match the MGNREGA wage if they wanted to attract workers to work in their fields. Second, by reducing or mitigating distress migration to the urban areas, it contributed to push up wages also in the non-farm sector, thus benefiting casual workers in towns and cities too. Third, it has allowed one member of the family to work under MGNREGA, while another member works in the fields, thus doubling their daily income.

An authoritative study by the National Council for Applied Economic Research and the University of Maryland concluded that the programme was responsible for 32% of poverty reduction seen in recent years and for preventing 14 million families from falling back into poverty. These are not trivial achievements.

Using the MGNREGA funds to pay for the wages of labourers working in the fields of large farmers will greatly reduce the poverty reduction impact of the programme. At present, most MGNREGA workers work in the fields of farmers and then turn to the MGNREGA when there is no farm work available. It is easy to foresee that large farmers – who in many villages have an enormous power over the local administration and on gram panchayats – will be able to direct the bulk of the funds for paying the wages of their labourers, leaving little resources available for other types of works. This would represent a huge financial loss for most MGNREGA workers. Moreover, it would harm the construction of much-needed rural infrastructure that the MGNREGA is contributing to build.

Furthermore, and at least equally important, using the MGNREGA to pay for the wages of agricultural labourers will dramatically diminish the labourers’ bargaining power vis-à-vis the farmers.

This could have downward pressures of rural wages – which are one of the main engines of poverty reduction in rural areas – and reinforce the labourers’ dependency on the farmers. The MGNREGA has allowed people not to work in the fields, if they so choose.

For instance, we spoke with numerous women who told us that they no longer work in the fields of farmers, so that they can avoid being sexually harassed. Many Dalit workers told us that they can now refuse working opportunities in the fields of those farmers who abuse them or do not treat them with respect, i.e. that practice untouchability. In still other cases, Dalits workers told us that they can now conduct a more dignified existence because they do not fear to be boycotted by the farmers anymore, as they have the safety net of the MGNREGA. All this would change irremediably if MGNREGA is transformed from an alternative source of employment into a scheme for subsidising agricultural wages.

The irony is that very little would change in terms of alleviating farmers’ distress. First, the farmers most acutely hit by the decades-long agricultural crisis tend to own small or medium-size plots of land and rely mostly on family labour. Paying for their labour will make little difference for them. Even for large farmers, however, the labour component, depending mostly on whether their land is irrigated or not and on the type of crop, very rarely exceeds 25% of their investments – and usually represents a much lower percentage. The bulk of the expenditure comes from other inputs such as fertilisers, pesticides and corporate-owned seeds, whose price has increased manifolds in the last decade – much more than agricultural wages.

Second, using the MGNREGA to pay for labourers’ wages would not increase much the availability of workers willing to work in the fields. This is largely a myth propagated by farmers’ representatives, but it is a fact that the MGNREGA virtually stops in many villages during the agriculture peak season. Shortage of labour is mainly due to migration to cities and the greater availability of non-farm work, even in rural areas.

Over a decade ago, the Swaminathan committee submitted its final report to the government. The report, written by a team led by one of India’s most respected agricultural scientists, has been largely ignored first by the UPA government and then by the present administration. If the Parliament could dedicate at least some attention to the report, it will find a set of feasible solutions to alleviate farmers’ distress that will not put in jeopardy the achievement of one of India’s most successful anti-poverty policies.

Of course, using the MGNREGA to fund the wages of agricultural labourers is a much easier solution for the government: it does not cost a single rupee and is likely to yield political dividends. This is not because it will have any significant impact of the well-being of distressed farmers, but because it will restore power relations as they were before the introduction of the programme.

This is not to say that MGNREGA has no potential to help farmers in distress. In fact, it could be an important tool for the government, would it be willing to provide additional resources to fully guarantee 100 days of employment to whoever demands it.

This would support agrarian demand, both by supporting agricultural labourers’ livelihood and by investing in much-needed rural infrastructures, which could in turn sustain agricultural productivity. There is also a great need to maintain and preserve existing infrastructures, which can be done using labour paid through MGNREGA. If one wants to be imaginative, it is also possible to use the willingness to work under MGNREGA as a collateral to increase access to institutional sources of credit for small and marginal farmers, so that they need not to rely on rapacious moneylenders.

But making it a scheme for the benefit of large rural employers will not be the solution to decades of neglect of the rural world by successive governments.

Diego Maiorano is a research fellow at the Institute of Asia Pacific Studies, University of Nottingham. He will soon join the Institute of South Asian Studies, National University of Singapore.

Chakradhar Buddha is Convener, Samalochana and works on tribal issues.