Unused Cess Funds for Construction Workers in India

January 25, 2025

The issue of unutilised cess funds for construction workers has gained attention following a Right to Information (RTI) response from the Union Labour Ministry. The response revealed that welfare boards across various states have failed to allocate amount of cess collected from employers, amounting to ₹70,744.16 crore. This situation raises concerns regarding the welfare of millions of construction workers in India.

Background of the BOCW Act

The Building and Other Construction Workers (Regulation of Employment and Conditions of Service) Act was enacted in 1996.
Its primary purpose is to regulate employment conditions and ensure welfare for construction workers.
The Act mandates the formation of Construction Workers’ Welfare Boards by state governments to oversee the implementation of welfare measures.

Cess Collection Mechanism

Under the BOCW Act, welfare boards are authorised to levy a cess on employers.
This cess ranges from 1% to 2% of the total construction costs incurred.
The collected funds are intended for various welfare initiatives, including temporary accommodation, sanitation facilities, and social security benefits for workers.

Current Status of Cess Funds

Since the implementation of the Act in 2005, ₹1,17,507.22 crore has been collected as cess.
However, only ₹67,669.92 crore has been allocated to the workers, leaving a staggering ₹70,744.16 crore unutilised.
This underutilisation marks gap in the intended welfare support for construction workers.

Issues in Fund Utilisation

The utilisation of cess funds has been alarmingly low. For example, Maharashtra has collected ₹19,489.25 crore in cess over 19 years but has allocated only ₹13,683.18 crore. This discrepancy suggests possible cess evasion by builders and employers. The lack of accurate data on construction projects further complicates the situation.

Impact of COVID-19

The COVID-19 pandemic exacerbated the plight of construction workers. Many faced hardships during the lockdowns, with insufficient support from the government. The exodus of workers back to their villages brought into light the inadequacies of existing welfare measures.

Future Concerns

Concerns are growing regarding the proposed Code on Social Security. Critics argue that it may dilute the cess collection process and reduce workers’ entitlements. The potential shift from statutory provisions to discretionary facilities could undermine the rights of construction workers.

State-Level Implementation

Implementation of the BOCW Act varies across states. Many states have not reconstituted welfare boards effectively. There are allegations of attempts to divert funds away from workers’ welfare to state exchequers. Only Kerala has been noted for better implementation of the Act.

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