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Rural development minister Jairam Ramesh. Photo: Pradeep Gaur/Mint
Rural development minister Jairam Ramesh. Photo: Pradeep Gaur/Mint

Govt subsidizes loans for rural women self-help groups

Rural development minister Jairam Ramesh says UPA considering changes to National Rural Employment Guarantee Act

New Delhi: Ahead of the general elections expected in April-May, the Congress party-led government on Monday announced the implementation of a budget promise to provide loans to rural women self-help groups (SHGs) at rates on a par with loans extended to farmers.

Rural development minister Jairam Ramesh, who made the announcement at a press conference in New Delhi, also said the Congress party-led United Progressive Alliance (UPA) government was considering changes to the National Rural Employment Guarantee Act to bring minimum wages paid under the flagship programme on a par with the minimum wages fixed by state governments for agricultural labour.

Rolling out the 1,400 crore interest subvention on loans taken by SHGs, a key initiative under the UPA’s ambitious National Rural Livelihoods Mission (NRLM), Ramesh said a low lending rate of 7% will be applicable for loans of up to 3 lakh availed by women SHGs from 1 April 2013 in 150 of India’s 640 districts.

These districts were chosen on the basis of those in the grip of Maoist insurgency, poverty and backwardness, the minister said.

SHGs that repay loans on time will pay 4% interest, the minister said.

“In (the financial year) 2013-14, total budgetary allocation for the NRLM is 2,600 crore. Out of 2,600 crore, we are spending 650 crore for subsidizing interest rate in 150 districts and we are spending 750 crore to subsidize the interest rates in the non-150 districts," Ramesh said.

“So out of s2,600 crore budgetary allocation for NRLM, 1,400 crore is the total allocation for subsidising interest rates. That is all coming from the ministry of rural development. It is not the favour being done to us by the finance ministry," he added.

The NRLM has set a target of covering 70 million rural poor households across all the 250,000 gram panchayats, or village councils, through six-seven million SHGs and federated institutions of rural poor women in a period of 8-10 years, and provide support to help them come out of poverty.

On the issue of parity of wages under the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS) and the Minimum Wages Act of 1948, Ramesh said the rural development ministry was of the view that there should not be any disparity between the two.

Separately, the MGNREGS wage rate, that was already linked to the consumer price index for agricultural labour, will be increased from 1 April this year, the minister said.

He conceded that in 14 states, including Bihar, Jharkhand, West Bengal and Rajasthan, there was a mismatch between the minimum wage paid to unskilled agricultural labour and the wage set by the Central government to be paid under MGNREGS.

“There should be one minimum wage and if under MGNREGS the wage is low then it should be brought on par with the minimum wage set by the states," the minister said. “We will have to modify the MGNREGS Act; without this, it (parity in wages) won’t be possible."

The Karnataka high court in 2011 ruled that the Central government was liable to pay higher wages under the rural employment programme in tandem with that of the state’s minimum wage rate. The Central government appealed against the order in the Supreme Court but the apex court upheld the high court order in 2012.

On Monday, Ramesh said the Central and state governments need to have consultations to settle the matter as “there is also this fear that in one year, a state government revises minimum wages three or four times then it will affect the Central government’s budget." He was referring to apprehensions expressed by Prime Minister Manmohan Singh and former finance minister Pranab Mukherjee on the matter.

While the Central government picks up the tab for payment of wages under MGNREGS, state governments pay the minimum wages for unskilled agriculture labour.

Prime Minister Singh had turned down a proposal in 2010 suggested by the National Advisory Council (NAC), led by Congress party chief Sonia Gandhi, to ensure parity between the MGNREGA wages and the minimum wages set by states. Singh instead increased MGNREGA wages in January 2011 by linking it to the consumer price index for agricultural labour, thereby delinking the MGNREGA wage rate from agricultural minimum wage.

“The matter is under consideration; we have sent the proposal to amend the MGNREGA to different ministries and we have also constituted a committee to look into this matter which is expected to submit its report soon," Ramesh said.

According to Harsh Mander, former NAC member, “The minimum wage is just that, the minimum that a person should be getting. The state should be the model employer and not say that we can’t do this because wages will go up. Because if the state does this then what about the private sector then? The government should not be flouting its own minimum wage legislation."

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