Representational image of construction work | Photo: Dhiraj Singh | Bloomberg
Representational image of construction work | Dhiraj Singh | Bloomberg
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New Delhi: The central government has opposed Madhya Pradesh government’s application seeking a loan from a fund that finances welfare schemes for construction workers, saying it would amount to diversion of funds.

In an affidavit filed before the Supreme Court last week, the Ministry of Labour opposed the BJP-ruled MP government’s application that sought a modification of an earlier SC order, passed in August 2017, that prohibited states from utilising the funds collected under the Building and Other Construction Workers’ Welfare Cess Act, 1996.

In 2017, a bench led by Justice M.B. Lokur (now retired) had directed the central government and states to implement two 20-year-old laws to augment the living conditions of construction workers and their families.

The two laws — the Building and Other Construction Workers (Regulation of Employment and Conditions of Service) Act, 1996 (BOCW Act) and the Building and Other Construction Workers Welfare Cess Act, 1996 — are meant to regulate employment service conditions of building and construction workers, and provide for safety, health and welfare measures.

However, the Madhya Pradesh government has now sought the apex court’s permission to take a loan of Rs 1,000 crore from the state welfare board that presently has around Rs 1,985 crore in its bank account.

According to the MP government, the state suffered financial losses due to the Covid-19 pandemic with its revenue collection falling by 50 per cent.

The matter was taken up by a bench led by Chief Justice S.A. Bobde Monday.

During the hearing, Additional Solicitor General Madhavi Divan said the central government had reservations “over diversion of funds.”

“These funds are specifically for vulnerable construction workers,” the ASG told the bench, which then said that it wanted to hear the statutory board, in-charge of the funds, before deciding the plea.


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Funds important to sustain welfare schemes — Centre

The central government’s affidavit detailed the mitigating measures it had undertaken to protect the construction workers against economic disruption caused due to the pandemic.

It noted that, among other things, it had issued guidelines to all states to frame a scheme for the transfer of adequate funds to the bank accounts of construction workers through direct benefit transfer from the cess funds collected under the BOCW Act.

According to the affidavit, all state boards have cumulatively disbursed over Rs 5,000 crore to the bank accounts of 1.83 crore building and construction workers (BOC) during the lockdown and thereafter.

“It is submitted that in order to financially sustain these welfare schemes in the long run, with every increasing base of the BOC beneficiaries, the state boards need significant cess fund corpus,” noted the affidavit.

The two laws — BOCW and the Welfare Cess Act, 1996 — provide social security and welfare benefits to construction workers registered as beneficiaries and utilisation of the fund, by way of loan or any other means, for purposes other than those mentioned in the legislations, may not be permissible and tantamount to diversion of funds, the affidavit added.

Even the 2017 judgment came down heavily on states and warned them to ensure there is no diversion of funds, it noted.


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Madhya Pradesh to return loan amount once state exchequer replenished

Meanwhile, according to the Madhya Pradesh government, the Covid-19 pandemic and the subsequent lockdown, which halted all economic activity, led to an acute decline in the state’s revenue.

“Due to the lockdown and spread of Covid pandemic, the revenue collection of the state in the months from April to June 2020 was only Rs 6,551 crore compared to Rs 12,992 crore in the same months in 2019,” noted the state’s application.

Even mining activity remained suspended, leading to sharp reduction in royalties and other taxes.

The decline in revenue receipts in stamps and registration has been 45 per cent, in state excise it is 57 per cent, while reduction of 20 per cent was seen in revenues and taxes on sale and trade, the MP government said.

“This is resulting in financial resource crunch for the state government, specifically for implementation of welfare schemes and completion of ongoing capital infrastructure projects,” read the application.

It added that since the state welfare board had spent around Rs 376 crore on construction workers in 2019-20, hence a loan of Rs 1,000 crore out of the Rs 1,985-crore corpus would not hinder its functioning.

The state also noted that it will return the loan amount to the corpus once its exchequer is replenished within a year.

On the state’s claim that it had to look after interests of a large number of migrant labourers who returned to MP due to Covid-19, Diwan submitted Monday before the CJI-led bench that such persons will be eligible for the schemes in states where they are registered as construction workers.


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