Rs. 26,962 Crore Collected As Labour Tax, How Much Was Actually Spent On Labour Welfare?

The Logical Indian

May 16th, 2017 / 6:28 PM

Image Credits : GG2

“It is a labour indeed that puts the difference on everything” – John Locke

Two construction workers, Ramu, 26, and Islam Sai, 22, died after falling from the 7th floor in an under-construction building. The investigation found that the workers who died were not given any safety equipment. And there were no protection measures like net protection at that height.

The Indian government passed the Building and Other Construction Workers Act, 1996, commonly known as ‘Labour Tax’ in 1996. The Act empowers the Central Government to notify states to form Welfare Boards and collect a cess not exceeding 2% but not less than 1% of the cost of construction incurred by the employer. All the Indian states collected approximately Rs 26,962 crore have been collected in the name of Labour Cess as on March 2016 – but only Rs 5,684 crore (21%) has been used. Where the money went nobody knows, and departments which are responsible are also not ready to give an answer.

Recently the Supreme Court, hearing a PIL, said, “Where has the whopping amount of more than Rs 20,000 crore, meant for workers’ welfare, gone? Spent on tea parties or vacation of officials?.Even the Comptroller and Auditor General (CAG) doesn’t know.”

‘National Campaign Committee for Central Legislation on Construction Labour’, an NGO, filed a PIL in the Supreme Court. The NGO had alleged that the state governments are not utilising the cess collected properly for the welfare of the workers.

Supreme Court directives

  • States should inform the CAG about the amount of labour cess collected under the Building and Other Construction Workers’ Welfare Cess Act, 1996 by March 2017.
  • Any amount, which has been collected but not yet transferred to the board, shall be transferred within a period of six weeks with intimation to the CAG .

Deteriorating conditions of construction workers

We all are aware of the deteriorating condition of labourers in India. Every day hundreds of labours die due to various reasons ranging from accidents to health issues. The deprived condition of the manufacturing sector had resulted in many workers becoming half-blind, paralysed, and suffering from mental illnesses and numerous other health concerns. Even when our government has mandated 8 hours/day for the worker, some employers force their workers to work beyond stipulated time of 8 hours. Many workers live in the same area where construction happens, and they get a 10×10 ft area for 5-7 people to sleep.

Health issues faced by construction workers

  • Musculoskeletal disorder: Workers start having pain in their back and lower part of the body. There are also very high chances of permanent disability.
  • Respiratory problem: Workers in the construction sites inhale fine dust particles which cause lung problems, and sometimes it may lead to cancer.
  • Hearing problem: Construction workers are always exposed to harsh, loud sounds which create a hearing problem at a very young age.
  • Skin disease: These workers are always in contact with harmful and dangerous chemicals which cause them redness, dryness and itching of the skin.
  • Vibrations: Workers who operate heavy machinery are prone to vibrations which are capable of damaging their blood vessels and nerves.
  • Psychosocial health problem: Stress, fatigue and burnout are very common in this kind of occupation.

How are the funds collected are utilised?

Funds collected should be utilised for the welfare of the construction workers who are registered under this act. A total of 2.15 crore construction workers are registered as on December 2015.

For example, the schemes implemented by A.P. Building & Other Construction Workers Welfare Board are:

  • Personal Accidental Death Relief: Rs. 2 lakh
  • Permanent Disability Relief: Rs.25,000/- to Rs.2 lakh
  • Natural Death Relief: Rs.30,000
  • Maternity Benefit: Rs.10,000
  • Temporary disability Relief up to  Rs.4,500
  • Funeral Expenses: Rs.10,000
  • Training in Safety and Skill Development: Rs.8,000
  • Pension Scheme (NPS Lite-2010): Rs.3,000
  • Marriage Gift: Rs.5,000
  • Accidental death relief: Rs.50,000
  • Permanent Disability Relief: Rs.10,000/- to 20,000

Though the cess is collected in various states, the plight of the workers is still the same. The below table show the amount collected and spent as labour cess in some of the major states in India as on 31.03.2016:

Total labour cess collected as 31.03.2016 in decreasing order of labour cess usage.

With 94.51 % spending of labour cess collection, Kerala occupies the first position followed by Arunachal Pradesh (78.95%), Chhastisgarh (61.05%), Mizoram (61%), and Puducherry (58.1%). States like Gujarat and Assam spent less than 2% of the cess for welfare schemes and Goa spent 0% of the cess collected.

Top 10 states which spent highest % of labour cess collected


The new abolition of labour cess after implementation of GST bill by the NDA government has raised the question of “to be or not to be”. On July 27, 2016, the finance ministry arbitrarily issued orders to stop the collection of these cesses, but for a long time, workers and their representatives were not aware of these rules. Now the hearing on this issue is still going on.

But those massive previous scams in labour cess in past 20 years is questioning the credibility of the cess. “Naam nahi, kam matter karta hai”: no matter how noble the step is, if it is not giving the desired outcome then it is futile. Whereas the other side of a story demands a better alternative for our labour class, who is suffering every moment.

The Logical Indian requests the central government and the state governments to utilise the funds collected properly and also to focus on taking steps to encourage more workers to register themselves with the labour department to make themselves eligible for the schemes.


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