NREGS, launched by the Central government in 2006, guarantees 100 days of wage employment every fiscal to each household whose adult members volunteer to do unskilled manual work. For 2009-10, the Centre has allocated Rs 30,100 crore to the scheme, which currently covers 4.5 crore households. The scheme was expanded to cover all 615 districts of the country in 2008-09.

NREGS is introduced with the avowed objective of providing 100 days employment to rural work force during the periods when no agriculture work is available. It was never envisaged that agriculture should be deprived of labour when it is needed especially during sowing and harvesting periods. But the unintended situations have arisen where labour shortage is felt in states like Punjab and Haryana during paddy sowing season. Farmers were forced to pay double the rates prevailing during the previous season thus increasing cost of cultivation. One reason for increase in prices of agri commodities is the rising cost of village labour that the urban consumers find tough to factor in. It's also fashionable to blame the serial rise in minimum support prices for higher food prices. Yet, has anyone spotted a farmer fattening on just the MSP, without additional advantages of soil, technology, credit and market access. A high MSP is no guarantee of farm profits. It's an incentive, like the variable part of your salary. That's all. Moreover, when yields are stagnant and input costs climbing, raising MSP is a necessary choice. India can't afford to let go of the few supply certainties it has in the hope that international markets will provide.

NREGS pay off: Many commentators feel that the UPA’s impressive performance was mainly due to NREGS. It had its downside as well, as with any state-run scheme. Some say the ruling party in the State to give employment on paper to the party functionaries misused it. Second, agricultural labourers detested hard work in the fields and settled for the comfort of dole, which is what the employment guarantee scheme in some pockets turned out to be. BL010609

Farmers here wait at railway stations for trains from these two states, as the premier bread basket state stares at a massive labour shortage ahead of the paddy sowing and transplantation season.  The transplantation — an intensive process that requires extra 7,00,000 labourers over and above the domestic supply — should ideally begin in the first week of June, but the labour tap is now down to a trickle after overflowing in previous years. The reasons are many, but chief among them is the National Rural Employment Guarantee Scheme — that has helped many labourers find work closer to their villages. Farmers are offering to double the wages for these unskilled labourers. Also on offer are blandishments such as water coolers and free food. “The labourers usually come in groups with one leader who is given Rs 3,700- 4,000 per hectare. Over and above, the farmer provides labourers tea, even milk, liquor and food depending on the lifestyle and capability of the farmer.” Many marginal farmers rather than hunting for labourers, have preferred to either sell their land or give it on annual contracts. With nearly three quarters of Punjab’s farmers having land holdings of less than two hectares, mechanisation may not be an optimum solution.  Punjab, the single-largest contributor to the Central pool of wheat and paddy, is considered the food bowl of India. “In 2008-09, Punjab’s contribution of wheat stood at 44%, and rice 31%. ET150509

The CAG had conducted an audit of the NREGS during May to September 2007 in the 200 districts that were initially covered by it. In its audit report tabled in Parliament in October 2008, it had found significant dilution of the NREG Act because of poor record maintenance, delayed payment of wages and non-payment of unemployment allowance. The audit had noted that “systems for financial management and tracking were deficient, as monthly squaring and reconciliation of accounts at different levels to maintain financial accountability and transparency was not being done”.

A joint study by the National Council for Applied Economic Research and Public Interest Foundation (PIF) thinks not. Analysing how wage rates behaved in the two years (2004-06) prior to the scheme and two year after it was implemented (2006-08), the study finds that the increase in wages could be ‘largely attributed’ to the introduction of this scheme but this was only in nominal terms.
During 2006-08, wage rates increased by more than twice (6.7-7.4 per cent) compared to just 2.7-3 percent growth in the previous two years. This gain was more than offset by the rise in the Consumer Price Index (CPI) which went up by 2.3-2.4 times after the scheme was launched. In real terms, rural wages, except for female farm workers, declined after NREGS was introduced. It’s not clear how much of this sharp rise in rural inflation was on account of the higher money flow through NREGS or for other reasons like higher support price for crops.