Building And Other Construction Workers (BOCW) 1996

Policy update
Shivali Yadav

Background :

Back in August 1996, the government put two connected laws on the books: the Building and Other Construction Workers (Regulation of Employment and Conditions of Service) Act, and alongside it, the Building and Other Construction Workers’ Welfare Cess Act. The idea was straightforward enough: to regulate how building workers were employed,

and carve out dedicated safety, health and welfare provisions specifically for them. The Ministry of Labour and Employment had good reason to single this group out. Construction workers, mostly migrants, mostly working informally, were among the most exposed people in India’s unorganised workforce, carrying much of the physical weight of the country’s infrastructure push while having almost no job security or social protection to fall back on (Ministry of Labour and Employment, 1996a, 1996b).

In practice, the BOCW Act applies to any establishment with ten or more building workers, and such establishments have sixty days to register once work begins. Funding for welfare measures comes through the Cess Act, which allows the Centre to levy 1 to 2 per cent on construction costs; in the end, the government settled on the lower bound of 1 per cent.

That revenue doesn’t just sit with the Centre; it’s channelled into the Building and Other Construction Workers’ Welfare Fund under Section 24, and every State is obligated, under Section 18, to set up its own Welfare Board to register beneficiaries and run the Fund locally under Section 22. Eligibility isn’t complicated either: workers need to be between 18 and 60, with at least 90 days of construction work behind them in the past year (Ministry of Labour and Employment, 1996a, 1996b).

The constitutional question around the levy didn’t stay unresolved for long. In Dewan Chand Builders and Contractors v. Union of India, (2012) 1 SCC 101, the Supreme Court upheld it, describing the cess as a ‘fee’ that falls under Entry 97 of List I of the Seventh Schedule. More recently, the framework itself has shifted as of 21 November 2025, the Cess Act was absorbed into the Code on Social Security, 2020, bringing with it a change that’s more consequential than it might sound: employers now self-assess how much cess they owe, rather than having a government authority assess it for them (Supreme Court of India, 2012; Ministry of Labour and Employment, 2020).

Functioning :

The governance structure is federal by design. The Ministry of Labour and Employment sets national policy and the model welfare framework, while tripartite State Welfare Boards, made up of worker, employer and government representatives, handle registration of establishments and beneficiaries, collect the cess, and pay out benefits: accident and disability compensation, health and maternity support, education assistance for workers’ children, housing, pensions, funeral assistance. (Ministry of Labour and Employment, 1996a).

After the Supreme Court’s 19 March 2018 ruling in National Campaign Committee for Central Legislation on Construction Labour v. Union of India, the Central Government put together a Model Welfare Scheme that, among other things, extended paid maternity leave from 90 days to 26 weeks and added a cash benefit of Rs 6,000 per delivery (capped at two deliveries) for registered workers not already covered under Ayushman Bharat. (Supreme Court of India, 2018; Press Information Bureau, 2018).

Increasingly, worker identification has been layered onto the e-Shram portal, which launched on 26 August 2021 as the National Database of Unorganised Workers. By March 2023, per figures given to Parliament’s Consultative Committee for Labour and Employment, 28.65 crore workers had registered on e-Shram, and of those, only 2.60 crore were flagged as building and construction workers, noticeably fewer than the roughly 5.06 crore workers who were already registered directly with State Welfare Boards as of 1 November 2022. That mismatch says a lot about how patchy the integration between the two databases still is. (Press Information Bureau, 2023).

CAG audits at the State level have turned up plenty of implementation problems within the Boards themselves, too. In Madhya Pradesh, the State Welfare Board wasn’t even constituted until six years after the Act came into force, and the CAG’s 2024 performance audit found the Act didn’t line up cleanly with the State’s own 2002 Rules, on top of which required field staff for cess collection and scheme implementation simply hadn’t been deployed.(Comptroller and Auditor General of India, 2024).

Performance :

Cess collection has climbed steadily since 1996, but the money spent on actual welfare has consistently lagged, even though the utilisation ratio has improved gradually across successive reporting cycles to Parliament:

Reference Point	Cumulative Cess Collected (Rs crore)	Cumulative Cess Utilised (Rs crore)	Share Utilised
2017 (20 yrs since 1996)	32,632.96	7,516.52	~23%
As on 30.09.2018	45,473.10	17,591.59	~38.7%
~2021 (25 yrs since 1996)	78,521.24	35,399.40	~45.1%
Most recent reported figure	1,17,507.22	67,669.92	~57.6%

Source: Parliamentary Standing Committee on Labour (2017); Press Information Bureau, Ministry of Labour and Employment (17 December 2018); Ministry of Labour and Employment reply in Rajya Sabha to Unstarred Question by Shri Amar Patnaik (c. 2021, ~25 years since enactment); most recent figure per Ministry of Labour and Employment data placed before Parliament.

On the beneficiary side, roughly 5.06 crore construction workers were registered with State Welfare Boards as of 1 November 2022 (Press Information Bureau, 2023). The system did show it could rise to a crisis when needed during the 2020 COVID-19 lockdown; States pushed out Rs 4,957 crore in cash assistance to around two crore registered workers, with about 1.75 crore of those transactions going through Direct Benefit Transfer (Press Information Bureau, 2018). But performance swings wildly by State.

The CAG’s August 2025 report on Delhi found that, once you strip out the COVID ex gratia year, only 9.53 to 11.33 per cent of total receipts actually went toward welfare schemes, despite the Board sitting on accumulated funds of Rs 3,579.05 crore as of March 2023. The same audit turned up a Rs 204.95 crore discrepancy between cess figures recorded by district authorities and by the Board itself that nobody had reconciled, plus a worker registration renewal rate of just 7.3 per cent against a claimed all-India average of 74 per cent (Comptroller and Auditor General of India, 2025).

Madhya Pradesh wasn’t much better; the CAG’s Report No. 11 of 2024 found fund utilisation sitting around 13 per cent (Comptroller and Auditor General of India, 2024), while in Maharashtra, a 2025 CAG audit found a Rs 29.41 crore shortfall in cess recovery simply because the applicable Annual Schedule of Rates hadn’t been applied across the entire built-up area being assessed (Comptroller and Auditor General of India, 2025).

Impact :

Positive Impact

Over nearly thirty years, the BOCW framework has become India’s main social security architecture for construction workers, stretching accident and disability compensation, health and maternity support, education assistance, housing and pensions to a workforce that would otherwise sit largely outside the formal safety net. The Rs 4,957 crore COVID-19 disbursement to roughly two crore workers proved something useful: when centrally directed, State Boards are actually capable of running Direct Benefit Transfer at real scale and speed.

Implementation Challenges

Underutilisation of Welfare Funds

But government audit data tells a less flattering story about how the framework performs day to day. Even by the most recent parliamentary figures, only around 58 per cent of the Rs 1,17,507.22 crore collected nationally since 1996 has actually been spent, meaning more than Rs 70,000 crore is effectively sitting idle in Welfare Fund accounts instead of reaching workers.

State Level Administrative Capacity

That gap is far worse at the State level than the national average suggests. Delhi spends just 9 to 11 per cent of receipts on welfare, and Madhya Pradesh manages only 13 per cent utilisation; both stand in sharp contrast to the improving national trend, which points to the real bottleneck being State-level administrative capacity and Board functioning, not any flaw in the design or size of the cess itself.

Registration Integrity

Registration integrity problems make things worse still. Delhi’s CAG audit found 1.19 lakh beneficiaries linked to 2.38 lakh images, more than one image per worker in a lot of cases, along with duplicate and outright faceless images, which undercuts confidence both in how large the active beneficiary base really is and in how reliable the utilisation reporting actually is.

Emerging Issues :

1. Chronic Underutilisation of Cess Funds
The most persistent problem is chronic national underutilisation of cess funds. Even after nearly three decades, only about 58 per cent of the cumulative cess collected nationally has gone toward worker welfare, according to the Ministry of Labour and Employment’s most recent figures before Parliament. CAG audits also reveal significant interstate disparities, with only 9 to 13 per cent of receipts actually spent in Delhi and Madhya Pradesh, highlighting uneven welfare delivery across States.

2. Weak Cess Assessment and Financial Management
There’s also a more basic accounting problem: unreconciled cess assessment and collection. The CAG found a Rs 204.95 crore discrepancy between district and Board-level cess records in Delhi, and a separate Rs 29.41 crore shortfall in Maharashtra tied to incomplete application of the Annual Schedule of Rates. Financial compliance lapses have also emerged, with Madhya Pradesh’s Welfare Board failing to file income tax returns for four consecutive years, resulting in the loss of a Rs 4.43 crore TDS refund.

3. Weak Registration and Data Integrity
Weak registration and renewal systems compound the problem further. Delhi’s renewal rate of 7.3 per cent lags far behind the reported 74 per cent national average, and the CAG’s discovery of duplicate and ghost beneficiary images raises real questions about data integrity across the board.

4. Institutional and Governance Deficits
Delays in setting up the Boards themselves are another recurring issue. Madhya Pradesh’s State Welfare Board wasn’t constituted until six years after the BOCW Act was notified, which pushed back the start of welfare delivery in the State by years.

5. Diversion of Welfare Funds
There’s also a risk of cess funds being diverted away from their intended purpose. Instances have surfaced, including in Punjab, where cess money meant strictly for construction-worker welfare was proposed for other uses, such as building skill development centres, prompting legal and audit pushback.

6. Transition to the Code on Social Security, 2020
There’s also uncertainty introduced by the transition to the Code on Social Security, 2020. Shifting from authority-based cess assessment to employer self-assessment, effective 21 November 2025, is a meaningful procedural change, and its effect on collection accuracy and compliance isn’t clear yet.

Way Forward and Suggestions :

Having gathered approximately Rs 1.18 lakh crore, with additional amounts expected from a self-assessment cess system starting November 2025, the central policy challenge for BOCW Welfare Boards has evidently evolved. It’s not just about getting funds anymore; it’s about utilizing them effectively and presenting them transparently (Ministry of Labour and Employment, 2020). Set minimum yearly utilization ratios for State Welfare Boards, overseen centrally via e-Shram-linked reporting, enforcing tangible consequences for States that frequently fail to meet them (Press Information Bureau, 2023).

Release state-specific performance dashboards for Welfare Boards, and provide targeted technical support to the States that are the most behind (Comptroller and Auditor General of India, 2024; Comptroller and Auditor General of India, 2025). Harmonize cess assessment methods among States and require regular reconciliation of assessed, collected, and deposited amounts (Comptroller and Auditor General of India, 2024; Comptroller and Auditor General of India, 2025). Bridge the discrepancy between the 2.60 crore BOC-worker registrations noted in e-Shram and the approximately 5.06 crore workers registered directly with State Boards, aiming to create a unified and authoritative beneficiary database rather than having two conflicting ones (Press Information Bureau, 2023).

Implement Aadhaar-linked de-duplication and automated renewal systems to address the registration integrity issues identified by audits (Comptroller and Auditor General of India, 2025). Mandate legal deadlines for Board formation and regulation announcement, supported by central grants tied to incentives for prompt adherence (Comptroller and Auditor General of India, 2024). Transform the COVID-19 Direct Benefit Transfer model into an ongoing rapid-disbursal system for construction-worker welfare payments instead of viewing it as a temporary emergency measure (Press Information Bureau, 2018).

Broaden CAG-style performance audits, along with their presentation in State Legislatures, as implemented in Delhi and Madhya Pradesh, to all States on a consistent schedule (Comptroller and Auditor General of India, 2024; Comptroller and Auditor General of India, 2025). Monitor the initial implementation of employer self-assessment of cess as per the Code on Social Security, 2020 carefully, to ensure that collection precision remains intact amid the transition (Ministry of Labour and Employment, 2020).

Prohibit the use of Welfare Fund resources for non-BOCW objectives by implementing more rigorous independent audit verification before capital expenditures (Comptroller and Auditor General of India, 2025). Directed in this manner, the BOCW welfare framework has a genuine opportunity to transform its substantial, cess-funded resource pool into tangible benefits that construction workers can truly experience, aligning with Sustainable Development Goal 8.

References:

Ministry of Labour and Employment. (1996). The Building and Other Construction Workers (Regulation of Employment and Conditions of Service) Act, 1996. Government of India.
https://labour.gov.in/sites/default/files/BuildingandOtherConstructionWorkersAct1996.pdf
Ministry of Labour and Employment. (1996). The Building and Other Construction Workers’ Welfare Cess Act, 1996. Government of India.
https://labour.gov.in/sites/default/files/TheBuildingandOtherConstructionWorkersWelfareCessAct1996.pdf
Supreme Court of India. (2012). Dewan Chand Builders and Contractors v. Union of India, (2012) 1 SCC 101.
https://indiankanoon.org/doc/158566376/
Supreme Court of India. (2018, March 19). National Campaign Committee for Central Legislation on Construction Labour v. Union of India, W.P.(C) No. 318/2006.
https://indiankanoon.org/doc/181364900/
Press Information Bureau, Ministry of Labour and Employment. (2018, December 17). Building and Other Construction Workers Welfare Cess. Government of India.
https://pib.gov.in/PressReleasePage.aspx?PRID=1556624
Press Information Bureau, Ministry of Labour and Employment. (2023, March 27). Data of more than 2.6 crore Building and Construction Workers registered on E-Shram portal being shared with States. Government of India.
https://pib.gov.in/PressReleasePage.aspx?PRID=1910560
Comptroller and Auditor General of India. (2025). Report on Welfare of Building and Other Construction Workers, Government of NCT of Delhi (tabled in Delhi Legislative Assembly, August 2025).
https://cag.gov.in
Comptroller and Auditor General of India. (2024). Report No. 11 of 2024: Performance Audit, Government of Madhya Pradesh: Welfare of Building and Other Construction Workers.
https://cag.gov.in

About the Contributor:

Shivali Yadav is pursuing an M.A. in Liberal Studies at Govind Ballabh Pant Social Science Institute, Prayagraj, and is an IMPRI intern. Her work focuses on gender, education, youth, and public policy, with interests in educational equity and qualitative research.

Acknowledgement

The author sincerely thanks the reviewers and editorial team for their valuable comments, constructive suggestions, and guidance. Their feedback helped improve the clarity, structure, and analytical depth of this policy update.