As much as Rs 1.3 lakh crore has been spent, eight crore rural people have benefited and, for the first time, women are getting wages equal to their male counterparts under the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS).

This is what Prime Minister Manmohan Singh said at the MGNREGS Divas Celebrations in New Delhi, last week. But the impact of this flagship rural jobs scheme on agriculture is another story.

Farmers argue that this scheme is actually driving agriculture into an epic crisis by tightening the rural labour market. Besides pushing up labour costs substantially, this scheme has increased labour scarcity, spoilt the work culture of labour and reduced farmers’ incentives to invest in farms. How far are these issues true?

MGNREGS, the massive state-sponsored rural jobs scheme, was initially introduced with the avowed objective of providing 100 days of employment to the unskilled work force during the lean season of agricultural activity. It was never envisaged that the farming sector should be deprived of labour when it needed it, especially during sowing and harvesting periods.

However, in recent years, unintended situations have developed wherein labour shortage is felt in the agriculturally advanced States of Punjab, Tamil Nadu, Andhra Pradesh, Haryana, etc. Farmers in these States concede that the labour market was tight even before the launch of MGNREGS, but lament that the scheme has exacerbated the shortage, thereby forcing them to shift to non-labour-intensive horticulture crops or leave the field fallow.

Won’t this move of farmers have a devastating impact on foodgrains production? What is the underlying reason behind drying up of the agricultural labour market? Why is the labour tap, which was overflowing earlier in these premier bread basket States, now down to a trickle?

Taking away labour

The scheme holds the promise to transform the rural economy by essentially increasing the labour market access for marginalised groups. But the farmers have been making a hue and cry over skyrocketing wages. Some economists recently commented that such an increase in wages has come after a long period of stagnation and is bound to make the poorest of the poor better off.

There is no denying the fact that the wages should be increased to improve the living condition of the labourers. But the increase in wage rate should not hurt farmers who are already facing a severe crisis due to poor remuneration from crop cultivation.

The Consortium of Indian Farmers’ Association (CIFA) states that the scheme, instead of generating productive wage employment for unskilled rural workforce, is, in a true sense, taking away labour from the already troubled farming sector.

MGNREGS works in the richly irrigated areas often come in the way of ‘crop work’ and upset the agricultural wage market. Male labour is already scarce in rural areas owing to the boom in construction sector, mainly in urban areas. Most labourers available now in rural areas are women, who are also inclined towards the rural employment scheme where wage is assured for carrying out no tangible work, which is not possible in farm work.

This creates artificial scarcity of labour which, in turn, increases the wage rate. Getting accustomed to such wage for no work, will a labourer prefer to toil in farms?

Although the MGNREGS SameekshaReport (2012) of the Ministry of Rural Development failed to reveal its impact on agriculture, officials of the Ministry of Agriculture hint that this scheme caused a substantial increase in the cost of agricultural labour.

Ashok Gulati, Chairman of the Commission for Agricultural Costs and Prices (CACP) pointed out that between 2008 and 2011, labour cost increased by about 74 per cent at the all-India level, 88 per cent in Andhra Pradesh and 94 per cent in Tamil Nadu.

Similarly, the cost of cultivation data on different crops published by CACP clearly show that the wage cost paid for casual labour has increased at a faster rate after the introduction of the rural jobs scheme as compared with the earlier period (see Table).

This has escalated the cost of production of crops and reduced the profit margin substantially. In fact, farmers from the fertile region of Andhra Pradesh even declared a ‘paddy crop holiday’ during 2011 kharif season, citing wage cost escalation as one of the reasons.

‘Lazy workforce’ effect

The MGNREGS SameekshaReport seems to indicate that this rural jobs scheme has provided employment for the impoverished and the most marginalised community at an increased wage rate. The irony to this assertion of the report is that the scheme, instead of creating additional primary occupations for the rural poor, has created far greater than expected absenteeism from regular employment.

In fact, the rising demand for labour is in no way helping the landless to improve their livelihood; instead, it is forcing farmers to abandon their venture. Instead of toiling for additional hours, enhancing their incomes and climbing the aspirational ladder, the rural recipients seem to have given up their regular occupation, choosing to be satisfied with their current levels of income and consumption.

The work schematics are inflated in order to employ more number of people for more number of days for lesser amount of work, to satisfy all. The scheme, in fact, seems to be a travesty of sorts — those who did not have jobs still do not have jobs. But they have got money to buy food while not needing to work! It appears that the rural workforce is falling into the deadly trap of laziness. Can the state incentivise laziness?

Make scheme constructive

The farming sector has begun to feel the pinch. Various farm organisations have apprehended that farming as a profession will slowly vanish, if labour wage and scarcity of labour issues are not addressed at the earliest.

It is reported that farmers across different regions of the country have already switched to less labour-intensive options such as horticulture and tree crops. If these farmers resort to such a cropping pattern, then the central pool of wheat and paddy will definitely witness a historic deficit, which will, in fact, harm the labour community. Since more than 40 per cent of farmers already want to quit agriculture because of poor profitability, agriculture cannot be allowed to suffer any more.

As suggested by CIFA and other farmers’ organisations, the state should come forward to link MGNREGS with agricultural activities to bring down the investment required for crop cultivation, as has been done by Maharashtra in its employment guarantee scheme.

CIFA has also come out with a sensible suggestion that the scheme must be confined strictly to the lean season agriculture, which will be a ‘win-win’ situation for both the farmers and labourers.

Farmers will get their labourers when they need them the most, and labourers can remain employed for a longer period in a year. As rightly suggested by the Agriculture Minister, declaring an ‘MGNREGS holiday’ during the agriculture season would be the right way to tide over the crisis.

(Narayanamoorthy is Professor, Department of Economics, Alagappa University, Karaikudi. Alli is Assistant Professor, Economics, Vellore Institute of Technology).

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