 "NITI Aayog pushes for funding to build quarters for workers near factories")
Niti Aayog on Thursday released a report suggesting a host of measures, including viability gap funding (VGF) of up to 40 per cent of the total project cost -- excluding land -- for the Centre’s ambitious scheme to build mega housing projects near manufacturing plants where industrial workers could rent a room for as low as Rs 3000.
Union Finance Minister Nirmala Sitharaman had in her budget speech for the financial year 2025 announced rental housing with dormitory-type accommodation for industrial workers on a public private partnership (PPP) mode.
“The Prime Minister mentioned at the chief secretaries’ conference a few days ago that industrial housing in cities is as important as normal housing, without which our cities will not have a presentable face. We will be taking steps in this direction,” Niti Aayog Chief Executive Officer BVR Subrahmanyam said on Thursday.
A confidential version of the report consists of the financial implications of the programme, which will be negotiated with the finance ministry, the CEO added.
The programme is likely to be undertaken by providing VGF to private developers to keep dormitory rentals in check and reduce commuting costs and safety woes for workers working in industrial hubs, a report by the central think tank said.
VGF of up to 30-40 per cent of the total project cost (excluding land) will be jointly provided by the Department of Economic Affairs (DEA), contributing 20 per cent, and the sponsoring nodal Ministry of Government of India, contributing 10 per cent on the lines of ‘Financial support to Public Private Partnerships in Infrastructure’ scheme, with additional contributions from state governments, a government statement said.
The VGF can also be used to retrofit/upgrade existing brownfield workers’ accommodation facilities,” the report on “Site Adjacent Factory Employee (SAFE) accommodation” recommended.
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Rental housing with dormitory type accommodation for industrial workers will be facilitated in PPP mode with VGF support and commitment from anchor industries.
Given the population density and scale of operations, manufacturing relies heavily on migrant workers. According to the central think tank’s findings, the present situation in industrialisation presents a dilemma where the development of factories hinges on the availability of accommodation, yet the demand for housing relies on the existence of factories.
Inadequate accommodation near industrial hubs contributes to high attrition rates, low productivity, and workforce instability. Moreover, this prevents workers, particularly women, from migrating in search of better employment opportunities, thereby impacting the manufacturing sector’s competitiveness and undermining the sector’s growth potential, the report said.
“The success of China in manufacturing isn’t just that it built industrial estates, but it was accompanied by housing for workers,” Subrahmanyam said. According to the Aayog, if states bring out zoning reforms and apply residential rates for amenities such as electricity and other tariffs, this can bring down the effective rent per bed for a migrant worker to Rs 3900 per month.
On top of it, if the central government provides 30 per cent of this through VGF, this rental is likely to come down to Rs 3100. If corporations also pool in money for worker accommodation, the effective rental for a migrant worker will come down to Rs 2000 per bed per month, a senior government official said.
Industry representatives at the conference in New Delhi suggested that the contributions towards worker accommodation should be counted as Corporate Social Responsibility (CSR) expenditure.
In regulatory reforms, the report suggested that mixed land use zoning should be permitted in industrial areas to allow unrestricted construction of such accommodation. Alternatively, such accommodations can be designated as permitted land use within industrial zones.