Policy Update
Gargi Bisht
Background
Uttar Pradesh’s construction sector is supported by a large workforce engaged in building homes, highways and public infrastructure. For workers employed on a daily wage, or through contractors, however, employment does not necessarily provide access to pensions, health insurance or reliable compensation following injury. The building and other construction workers (BOCW) framework was designed to address precisely this gap by financing worker welfare through a levy on construction activity.
The Building and Other Construction Workers Act 1996, provides for the regulation of construction employment and worker safety. Its companion legislation, the Building and Other Construction Workers’ Welfare Cess Act 1996, establishes a levy on construction costs to finance welfare boards. Uttar Pradesh notified its implementing rules, “the Uttar Pradesh Building and Other Construction Workers (Regulation of Employment and Conditions of Service) Rules in February 2009 and subsequently established the Uttar Pradesh Building and Other Construction Workers Welfare board to administer registration and assistance schemes (CAG, 2025)
The arrangement is unique because the fund is tied to economic activity. Under the rules construction cess is taken from employers and construction projects sent to the Welfare Board and used to pay for benefits like maternity help, pensions, education support, marriage help and aid for disability or death. Uttar Pradesh’s September 2025 operating procedure argues that construction activity will carry a 1 % levy except for residential buildings that cost less, than ₹10 lakh (Government of Uttar Pradesh, 2025).
Functioning
The process begins with identifying construction establishments and estimating the cost of covered projects. Cess is assessed and collected through designated authorities, including Labour Department officials, development authorities, municipal bodies and officials responsible for government construction projects. The money must then be transferred to the Welfare Board, which administers the fund and processes eligible workers’ applications under its notified schemes.
This decentralised arrangement is important where construction activity ranges from private housing to major infrastructure projects and government works. It also creates multiple points at which revenue can be lost or delayed. A project may be overlooked during assessment, a liability may be calculated incorrectly or an authority may collect cess without transferring it promptly to the board. The CAG found that the state’s 2009 rules did not adequately specify several functions required under the central legislation, including provisions relating to the Board’s annual reports, accounts and other institutional responsibilities. The audit recommended updating the rules to address these gaps (CAG, 2025). Once resources reach the Board, they finance assistance for eligible workers and their families. These benefits are essential because construction workers frequently experience interruptions in earnings and face financial risks associated with maternity, children’s education, marriage, expenses, disability and old age.
However, registration is a separate requirement from cess collection. A construction project can generate revenue without the workers employed on it being registered with the Board. Similarly, a worker may be registered but have lapsed membership, an incomplete application or an unpaid claim. Effective welfare therefore requires both a functioning revenue system and an accessible beneficiary management system.
Performance
The CAG’s findings show that Uttar Pradesh’s revenue problem begins before money reaches the Welfare Board. In selected districts, assessments by Labour Department officers ranged from zero to 24% of the registered establishments during 2017-22. The audit also identifies inadequate monitoring of construction activity and failures to assess cess on certain projects (CAG, 2025)
A particular revealing example was the GIS- based survey intended to identify construction properties and improve collection in five cities. By January 2023, only Rs. 342.66 crore had been recovered against bills amounting to Rs. 1522 crore, leaving Rs. 1179.34 crore unrecovered. The government subsequently reported that recovery has increased to Rs. 872.11 crore in March 2024, demonstrating progress but also indicating that the billing and recovery process remained incomplete (CAG, 2025). The distinction matters as the amount billed is not the same as the amount collected.The unrecovered bills limit the Board from using these amounts to finance benefits.
The transfer of cess presents the second problem. The CAG found that collecting officers in six audited units failed to transfer Rs 84.64 crore collected during 2017-22 to the Board by March 2023. The units included development authorities in Agra, Lucknow, Moradabad and Varanasi, YEIDA, and Nagar Panchayat Lalgopalganj in Prayagraj. The Board had not taken action against the non compliant collecting officers identified in the audit (CAG, 2025). In addition, four development authorities transferred Rs. 29.48 crore with delays ranging from one to 31 months. These delays deprived the Board of the interest that timely transfer could have possibly generated.
The audit also questioned the practice of depositing much of the cess directly into the Board’s bank account without routing it through the prescribed government accounting framework. During 2017-22, Rs. 4483.63 crore of the Rs. 4559 crore in cess receipts with Article 266(2) of the constitution and warned that the arrangement weakened the transparency of public accounting (CAG, 2025).
These findings reveal a problem of accountability, not merely a shortage of funds. Without reconciliation between assessment records, collecting authorities, treasury transactions and the Board’s accounts, the state cannot reliably establish how much cess is due, how much has been collected and how much has reached the intended institution.
The utilisation figures raise a further concern. The CAG reported that only 6-31% of registered workers benefited from Board schemes during 2017-22. Scheme expenditure fell from ₹92.37 crore in 2019-20, representing 7.12% of the available fund, to ₹78.95 crore in 2021-22, representing 4.43% (CAG, 2025, Chapter VII).
The Board also invested ₹5,358.18 crore in fixed deposits across different banks without adopting an investment policy or calling for bank quotations, resulting in varying interest rates of 3.50-5.40%. The CAG additionally found that the Board spent ₹42.85 crore on land purchases in violation of relevant Supreme Court and Union government directions. Administrative expenditure exceeded the prescribed norms by ₹35.07 crore during 2017-19 (CAG, 2025, Chapter VII).
These findings do not establish that every unspent rupee was improperly held: maintaining reserves can be legitimate, and some benefits depend on eligible claims. They do, however, raise questions about whether the Board’s investment and expenditure decisions were sufficiently connected to its primary welfare mandate.
There is also evidence of progress that must be acknowledged.The Times of India reported that 5,57,567 workers benefited from Board schemes during 2024-25 with Rs. 710.96 crore reported as spent. This indicates continuing benefit delivery after the main audit period, although the figures do not independently establish the proportion of all eligible workers covered or resolve the audit’s concerns about collection and accounting (Times of India, 2025)
Impact and Emerging Challenges
The CAG points out a clear problem: there’s a big gap between how many workers are registered and how many actually receive benefits. By March 2022, the Board had registered 144.19 lakh workers, but only 47.97 lakh had renewed memberships and were still considered active, highlighting that the measures taken by the Board for renewing or reinstating memberships of beneficiaries that had lapsed were inadequate. The audit also found that 23.33 lakh ineligible people – those linked to mining, MGNREGS, or brick-making – had been registered anyway (CAG, 2025 p. 26).
This causes two major issues. First, many eligible construction workers lose their access because their memberships expire. At the same time, people who aren’t supposed to be part of the scheme make it onto the rolls. So, the real question is about whether the Board actually checks eligibility and keeps qualified workers in the system so they get their benefits.
These gaps matter most when workers have urgent needs. The CAG found that in some cases, even after applications were approved, workers faced delays or never received the help they were promised. There’s another major gap here: the Board didn’t conduct social audits of its schemes during the years covered by the report, so no one really knows how well things are working or what benefits reach the intended workers. Later, a pilot social audit for two schemes was conducted in Mohanlalganj block of Lucknow district in 2023-24, as noted in the government’s response (CAG, 2025). That’s not the only failure. The Board hasn’t kept up with regular annual reports, and accounts have often been prepared late. Without these basic records, workers, lawmakers, and civil society groups have almost no way to see what’s working – or if promised help actually happens.
The government has started to address some of these problems, especially around cess collection. On 6 September 2025, Uttar Pradesh issued an order laying out standard operating procedures for inspection, assessment, and collecting the cess. District magistrates, labour officials, development authorities, and municipal authorities were told to work together and keep inspection records (Government of Uttar Pradesh, 2025). This move matters, but just putting an SOP in place doesn’t guarantee that all the issues flagged by the CAG are fixed. The real test is whether authorities follow through, take action when people don’t comply, and regularly publish what’s recovered.
Way forward
Uttar Pradesh should first implement the September 2025 SOP through a unified register of construction projects. Building-plan approvals, municipal records, development-authority databases and public-works contracts should be reconciled so that every covered project can be checked for registration, assessment and payment. The government should publish district-wise figures on cess assessed, billed, collected and recovered, allowing progress to be measured against the gaps identified by the CAG.
Second, transfers to the Board should be reconciled monthly with collecting authorities and treasury records. The ₹84.64 crore that remained untransferred in the six audited units demonstrates why responsibility must be assigned to named officials, with time-bound escalation and appropriate action when collections are not remitted. Financial reporting should follow the applicable government accounting framework, and annual accounts and reports should be published regularly.
Third, the Board should shift its performance focus from registrations and fund balances to active coverage and timely payments. Its public dashboard should show applications received, approved, rejected and paid, alongside the average time taken for disbursement under each scheme. Renewal reminders, assisted registration and simplified procedures should reduce the risk that eligible workers lose access because of administrative hurdles.
Fourth, social audits should be expanded beyond the two-scheme pilot reported in Lucknow. Audits covering urban and rural areas could verify beneficiary eligibility, confirm receipt of payments and identify workers who were excluded despite meeting the requirements. The Board should also review its investment policy and ensure that expenditure decisions remain consistent with the statutory welfare purpose.
The central test is whether Uttar Pradesh can establish a reliable link between construction activity and worker protection. The 2025 CAG report documents failures at several points in that chain, while the September 2025 SOP and more recent benefit figures indicate that corrective action and delivery continue. The next step is to demonstrate, through transparent and comparable data, that more cess is being collected correctly, transferred promptly and converted into benefits that eligible construction workers actually receive.
References
- Comptroller and Auditor General of India. (2025). Audit report No. 4 of 2025: Welfare of building and other construction workers, Government of Uttar Pradesh. https://www.cag.gov.in/ag2/uttar-pradesh/en/audit-report/details/121891
- Government of India. (1996). Building and Other Construction Workers (Regulation of Employment and Conditions of Service) Act, 1996. India Code. https://www.google.com/url?sa=t&source=web&rct=j&opi=89978449&url=https://www.indiacode.nic.in/handle/123456789/13606%3Flocale%3Dhi&ved=2ahUKEwjTrsO3_siXAxUikeEIHXCCJJoQFnoECBoQAQ&usg=AOvVaw1bQJA02ln76OjuWetHttzf
- Government of India. (1996). Building and Other Construction Workers’ Welfare Cess Act, 1996. India Code. https://www.indiacode.nic.in/bitstream/123456789/21040/2/the_building_and_other_construction_workers%E2%80%99_welfare_cess_act%2C_1996.pdf
- Government of Uttar Pradesh. (2025, September 6). Order regarding inspection, follow-up action and standard operating procedures for assessment and collection of cess. https://indiacode.ecourtsindia.com/rules/regarding-inspection-and-follow-up-action-under-the-building-and-other-507f12e4/
- The Times of India. (2025, August 13). Not enough funds for labour welfare in UP: CAG. The Times of India.https://timesofindia.indiatimes.com/city/noida/not-enough-funds-for-labour-welfare-in-up-cag/articleshow/123266190.cms
- The Times of India. (2025, August 9). 5.5L workers benefit from welfare schemes. The Times of India.https://timesofindia.indiatimes.com/city/lucknow/5-5l-workers-benefitfrom-welfare-schemes/articleshow/123195725.cms
- Press Information Bureau, Ministry of Labour and Employment. (2021, March 25). Directions to State Welfare Boards on providing monetary assistance through direct benefit transfer to construction workers.https://www.pib.gov.in/PressReleasePage.aspx?PRID=1707562&lang=2®=48
About the Contributor
Gargi Bisht is a history postgraduate from Miranda House, specializing in medieval history. Her interest lies at the intersection of history, research, and public policy, exploring issues related to governance, society, development, and international relations.
Acknowledgement
The author would like to express sincere gratitude to the IMPRI team for providing this valuable opportunity and for facilitating a platform to engage in and contribute to research and policy discourse, and also the reviewers Anamika P K and Tanisha
Disclaimer: All views expressed in the article belong solely to the author and not necessarily to the organisation.
Read more at IMPRI:
