In MP, Rs 416.33 Cr from Construction Workers’ Welfare Fund Diverted to Populist Schemes: CAG Report

In a recently tabled report by the Comptroller and Auditor General of India (CAG) in Madhya Pradesh assembly, the national auditor indicted the state government for having funded a very populist scheme on electricity bill waiver, by diverting Rs 416.33 crore from an earmarked fund for construction workers welfare.

In August 1996, the Indian parliament enacted a legislation to provide for welfare benefits to construction workers. As per this legislation, the builder/construction industry needs to pay cess at the rate of one percent of the cost of construction. The legislation also introduced provisions on regulation of wages, working conditions, safety, health and welfare measures for construction workers.

As on March 31, 2022, Madhya Pradesh Building and Other Construction Workers’ Welfare Board (MP BOCW Board) had an unspent balance amounting to Rs 1,959.63 crore. In the fiscal year 2021-22, the welfare board received Rs 634.50 crore as cess payments from employers including interest earning on unspent amount invested in the form of fixed deposit.

In fiscal year 2021-22, MP BOCW Board spent Rs 1128.57 crore. However, it was found that a whopping Rs 416.33 crore (36.89%) of this expenditure did not go into funding any of the welfare schemes aimed at construction workers.

Diversion of construction workers’ welfare fund

In a startling revelation, the CAG audit report points out that in October 2021, the secretary of the MP BOCW Board paid Rs 416.33 crore to offset a subsidy provided in two populist electricity subsidy schemes – the ‘Mukhya Mantri Bakaya Bijli Bill Mafi Yojana, 2018’ for BPL consumers and ‘Saral Bijli Bill Yojana, 2020’.

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What is even more shocking is that the secretary took the decision unilaterally, without considering a dissenting cautionary letter, dated September 17, 2021, submitted by the welfare officer of BOCW Board, wherein it was stated:

“(I)t is not possible to incur expenditure on benefits other than mentioned in Section 22 (1) (a) to (g) of the BOCW Act”

Contempt of Supreme Court orders

CAG auditors have also detailed in paragraph 5.1.2 (page 28-29) of the audit report how this unilateral decision to divert Rs 416.33 crore amounts to contempt of Supreme Court orders dated August 21, 2015 and September 4, 2015. 

In these orders, the Supreme Court had observed displeasure that “the Cess fund was not being utilized for the benefits of the persons for whom it was collected”. Coming down heavily on the tendency of state governments to divert workers’ welfare funds to finance state government schemes, the top court had prohibited any such diversion and directed the Ministry of Labor and Employment to ensure compliance. 

The Union labour ministry, in turn, issued directives (June 2016) to all state governments, stating:

“Section 22 (1) (h) of the BOCW Act does not allow diversion of BOCW fund for any purpose other than the welfare of workers and their families exclusively.”

The same directive also desired that in case of any such violation, immediate corrective steps should be taken and the funds so spent should be recouped in the BOCW fund with immediate effect under intimation to the Union government.

This audit finding foregrounds concerns that several special purpose funds, such as this, are being diverted to fund populist schemes. For a welfare state to think of providing a waiver of the pending electricity bills for BPL families, the finance minister of the state should make allocations for the same. It is ridiculous that to run a populist welfare scheme for BPL families, a welfare fund meant for construction workers gets depleted by a whopping Rs 416.33 crore. 

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It is also worth noting that Shivraj Singh Chauhan, the former MP chief minister who allowed this illegal diversion of funds during his tenure, now gets to resolve a miniscule financial misappropriation of MGNREGS fund amounting to Rs 5.37 crore during the fiscal year 2021-22. 

While the Union labour ministry failed to issue any reprimand to Shivraj Singh Chouhan government for diverting Rs 416.33 crore from construction workers welfare fund to energy department for funding subsidies to three power distribution companies, Union rural development ministry, headed by Chouhan himself, has stopped allocating MGNREGS funds to West Bengal government during 2022-23, 2023-34 and 2024-25. 

Abysmally poor performance on registration of construction workers

During this performance audit, CAG auditors carried out a joint site verification at 40 randomly selected work sites. At these 40 sites, auditors met with 223 construction workers at work. The auditors found that only one of these 223 construction workers surveyed at these work sites was registered with the MP BOCW Board, while the remaining 222 workers (99.55%) were not registered with the welfare board.

CAG auditors were also surprised that the MP BOCW Board did not have any data regarding the total number of workers involved in building and other construction work in the state. The audit report stated that in August 2016, the board had launched an awareness generation project for identification, verification and registration of construction workers residing in villages. 

In paragraph 5.2.4 (p. 37-38), providing details on this project, CAG auditors highlights:

“The project was to be implemented by Madhya Pradesh Jan Abhiyan Parishad (and) the Board executed MoU with Parishad in January 2017 and as per MoU the Parishad had to provide real time data of activities carried out in each village to the Board through a mobile application….Scrutiny of the records revealed that the Board had paid ₹ 20.54 crore in February 2017 to the Parishad as first installment. We noticed that the Parishad claimed to have conducted a survey of 13 percent persons (51.89 lakh persons against required 3.94 crore persons). However, Parishad neither provided any data to the Board nor registered any building and other construction worker. In September 2018, Parishad produced utilization certificates of ₹18.71 crore without mentioning details of work done.”

Detailing how the principal secretary, labour department, completely failed in ensuring accountability, the audit report points out:

“As project did not meet the desired objectives, in February 2019, Principal Secretary, Labour Department requested Member Secretary, Planning Commission, Bhopal to return the amount paid to the Parishad with interest. The Parishad returned in February 2019, only ₹ 2.05 crore (including interest amount of ₹ 0.21 crore) to the Board. Thus, the expenditure of ₹ 18.71 crore incurred on identification, verification and registration of construction workers project remained unfruitful as not even a single construction worker could be registered as a result of survey carried out by the Parishad.”

Did we hear of any reprimand being issued by the Union labour ministry to the Madhya Pradesh government threatening stoppage of funding due to this financial misappropriation amounting to Rs 20.54 crore in February 2019?

The answer is no, and this although the CAG audit report clearly shows that the MP BOCW Board failed to comply with ministry's 2016 guidelines. In such cases of non-compliance, the CAG of India should be bringing such audit findings proactively to the attention of Union ministries.

Not a single inter-state migrant worker registered for welfare schemes 

The CAG audit further points out that although the labour department had issued instructions (January 2022) for registration of temporary workers/migrant workers in different welfare schemes (Sambal/BOCW etc) of the state government, the board did not register any temporary/migrant workers as of December 2022.

This is not the first time that the CAG has carried out an elaborate performance audit on the functioning of Madhya Pradesh BOCW Board – this is actually the third such audit. 

The first performance review covered the five-year period 2006-2011, reported in CAG audit report on Madhya Pradesh (Civil) for the year ended March 31, 2011, and the second one covered the five-year period 2011-2016, reported in CAG Audit Report on Madhya Pradesh (General and Social Sectors) for the year ended March 31, 2016.

It is high time that the CAG of India raises the question on whether its audit findings are leading to systemic reforms or if the constitutional audit has failed to instill fears in those who loot workers’ welfare funds at rampant intervals.

Himanshu Upadhyaya is at the School of Development Studies, Azim Premji University. Views are personal.

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