Process begins for statutory central minimum wage

States may set it higher, not lower; planned link to cost of living.

The Minimum Wages Act will be amended to enact a new centrally set minimum, in the wake of the National Advisory Council’s suggestion on asymmetries in this regard between states on payments for work done on schemes under the National Rural Employment Guarantee Act (NREGA).

The Union labour ministry has begun consultations on the proposed change and on making the set level mandatory for all state governments. The latter could set a higher level, but not less. At present, the national minimum wages are only advisory and states are free to accept or ignore these in setting their own minimum. What is suggested is that a new central statutory minimum would be linked to dearness allowance to make it flexible and sensitive to price fluctuations.

NREGA wage payments are funded by the Centre, but it does so at the rate of Rs 100 a day, which it hasn’t revised for two years. This Rs 100 level is less than the minimum set in various states. For instance, Andhra has Rs 112, Karnataka has Rs 133.80, Punjab has Rs 142, Mizoram has Rs 132 and so on.

In sum, there’s a situation where NREGA payments are less than the state’s own minimum wages in many places. In Andhra Pradesh, the state government even went to the high court, to press that the Centre fund at its higher level, not Rs 100. It even got a favourable order, but this has not been implemented; the case is still on.

This anomaly will continue under the proposed change, with states free to pay more. However, with a more realistic central level, to be also more flexible, the anomaly would be less. Also, there would be one central minimum, applicable to all central schemes.

Labour ministry officials did say such an amendment would also mean that states may need central permission to raise their minimum wages, but these details are yet to be settled.

In any case, with a revised minimum, the allocation for NREGA and other centrally-funded schemes would go up. The allocation this year was Rs 40,100 crore at the Rs 100 a day.