CAG expose: Construction workers’ board in Tamil Nadu loses crores annually due to flawed cess collection

CHENNAI: The Tamil Nadu Construction Workers Welfare Board (TNCWWB), which is the sole resort for workers in the unorganised sector for a myriad of financial help, is losing hundreds of crores of rupees annually in the absence of a robust system to ensure an accurate estimate of the value of construction and collection of Labour Cess, the Comptroller and Auditor General (CAG) has flagged in a report released recently.

According to the CAG report, the welfare board did not exercise any control over the assessment, collection and remittance of Labour Cess, which is the only source of its revenue.

Labour Cess was enhanced from 0.3% to 1%, a decade back, but not brought into implementation because of the lackadaisical attitude of the people running the board, sources say.

For instance, a builder who takes up a project worth Rs 100 crore has to pay Rs 1 crore to the welfare board as a Labour Cess. Construction workers must pay cess under rule 4 of the Building and Other Construction Workers Welfare Cess Rules 1998.

The fund generated through Cess is used for welfare and social security schemes for nearly 20 lakh registered members of the board and their family members. “Going by the CAG report and the multi-crore projects executed in the State, it seems obvious that we lose several crores of rupees every year,” said a member of the board, preferring anonymity.

The CAG flagged that there is ‘no system’ in place to estimate the amount of Cess collectable by TNCWWB. The absence of a system to watch the assessment, collection and remittance of Labour Cess, has left the board with no control over its sole fund source.

“It results in instances of short assessment of Cess at 0.3 per cent, instead of the revised rate of one per cent of the estimated cost of construction, which went unnoticed… it results in misappropriation, short-remittance,” said the report.

Citing a probe into 90 suspected cases of fraudulent short remittance of Cess in Kancheepuram district, the report pointed to misappropriation to the tune of Rs 15.85 lakh in 68 cases. It also further stated that the inter-state migrant workers fall between the cracks of flawed systems of registering the workers. They remain ghosts and fall out of the social security net.

However, the Chairman of the welfare board Pon Kumar countered the CAG report and said that they have a mechanism in place. “Without paying the Labour Cess, none will get the approval for construction of buildings. There might be a few cases of misrepresentation of facts and documents to avoid paying appropriate amounts towards Cess and other taxes. But we are contemplating a new system to check such malpractice,” he said. He, however, admitted to the shortcomings highlighted in the CAG report in both manual and electronic data collection.

“Inaccuracies in capturing vital data such as Aadhaar number, mobile number and bank accounts have compromised the quality of the registration of the database. None of the 1.45 lakh inter-state migrant workers were registered with the board,” said the report which came down heavily on the TNCWWB that it did not initiate effective action to enrol them.

Kumar said that migrant labourers were not showing interest in registering with the welfare board as they were uncertain of continuing their work in one site for more than five to six months. Since they keep changing the workplace, the board has also found it difficult to enrol them during onsite registration exercises.

“Many of them are hesitant to share their identification documents such as Aadhaar. But we are continuing our exercise and encouraging them to register with the welfare board. So far, we have enrolled around 6,000 migrant workers through offsite and online registration processes,” he said.