The lack of suitable accommodations restricts migration of workers, particularly women, thereby limiting the manufacturing sector’s growth potential, NITI Aayog said in a report titled ‘S.A.F.E (Site Adjacent Factory Employee) Accommodation-Worker Housing for manufacturing growth’ released on Thursday.
The report comes five months after finance minister Nirmala Sitharamn in her Union Budget 2024-25 speech said rental housing with dormitory type accommodation for industrial workers will be facilitated in public-private-partnership (PPP) mode with viability gap funding (VGF) support and commitment from anchor industries.
“Hopefully the budget announcement last time will get converted into a large government program,” NITI Aayog CEO BVR Subrahmanyam said.
According to Subrahmanyam, the financial aspects of the proposed scheme are currently being negotiated with the finance ministry.
The report also called for GST exemptions for accommodations meeting specified criteria (e.g., Rs 20,000 per person per month for a continuous stay of 90 days).The report pitched for including S.A.F.E. accommodations under the exemptions provided for industrial sheds, schools, colleges, and hostels in the draft notification issued by the Ministry of Environment, Forest, and Climate Change (MoEF & CC).The report further suggested amending zoning regulations to allow mixed-use developments near industrial hubs, facilitating worker housing close to workplaces.
To overcome financial barriers, the report pitched for providing up to 30%-40% of project costs (excluding land) through VGF (Viability Gap Funding).
“This includes 20% from the department of economic affairs (DEA) and 10% from the sponsoring nodal ministry, with additional contributions from state governments,” it said.
The report also emphasised on transparent bidding processes to determine VGF support, ensuring efficiency and cost-effectiveness.
It recommended leveraging VGF to upgrade brownfield worker accommodations, enhancing their safety, capacity, and utility.
The report highlights several challenges that hinder the development of worker accommodations, including restrictive zoning laws, high operating costs, and conservative building bye-laws, among others.
The NITI Aayog in a statement said India is poised to elevate its manufacturing sector’s contribution to GDP from the current 17% to 25% as part of its long-term vision of achieving Viksit Bharat by 2047.
This ambitious goal is aligned with the country’s objectives of becoming a global manufacturing hub under flagship initiatives such as Make in India and Atmanirbhar Bharat, it added.
“Realizing this vision demands a robust workforce strategy, including sufficient, proximate, and affordable housing for industrial workers,” the statement said.
Identifying several benefits of providing S.A.F.E. accommodations for industrial workers, the report said multinational corporations and global investors increasingly evaluate worker welfare and operational efficiency when making investment decisions.
Citing the Economic Survey 2023-24, the report said India needs to generate 7.85 million jobs annually until 2030 to sustain its economic growth trajectory and a significant portion of these jobs will come from the manufacturing sector, which is increasingly characterized by large-scale mega factories.
“These facilities require a centralised workforce, often composed of migrant workers, to maintain competitiveness and achieve economies of scale,” it added.