Build worker homes near factories to boost manufacturing productivity and competitiveness: Niti Aayog

NEW DELHI: The union government’s policy think tank Niti Aayog has called for building workers’ housing closer to factories by amending existing industrial zoning laws in a bid to make India’s workforce more productive and make it more productive. Manufacturing becomes more competitive.

The government will launch a scheme to provide housing for industrial workers, Niti Aayog said in a report, after union finance minister Nirmala Sitharaman talked about the scheme in her budget speech in July , called the “Adjacent Factory Employees (SAFE) Accommodation Program.”

In his speech, the Finance Minister said: “With the support of Viability Gap Fund (VGF) and the commitment of pillar industries, dormitory-style rental housing will be provided to industrial workers under the public-private partnership (PPP) model.”

Also read: Reform import duties to enhance competitive advantage of Indian manufacturers

Niti Aayog said that in consultation with various federal government entities such as the Ministry of Finance, Ministry of Textiles, Ministry of Housing and Urban Affairs, Ministry of Electronics and Information Technology, and state governments such as Andhra Pradesh, Tamil Nadu, and Tamil Nadu Later, the SAFE accommodation plan was proposed. Industry leaders from the textile, automotive, leather, food processing and electronics industries also participated in the consultation. Niti Ayoge added that the scheme will be piloted in “champion states” with support from the Ministry of Housing and Urban Affairs.

The government can subsidize rent

It said building the infrastructure for this would only be possible if investors received good returns, which would require workers to pay about $$4,000 per month for 80 square feet of space. However, the think tank added that this would be equivalent to about 30% of a worker’s monthly salary, making it unaffordable. It added that direct government support could reduce the cost of these spaces by approximately 25%, thereby lowering monthly rent for workers to approximately $3,000.

“While this amount is within the reach of most formally employed workers earning minimum wage or above, negotiations with employers have also shown a willingness to share part of the workers’ rental costs,” Niti Ayog said.

Also Read | India’s BUB Challenge: Why Bihar, Uttar Pradesh and Bengal must industrialize fast

It is said these will be purpose-built long-term dormitory-style accommodation for industrial workers, located close to their workplaces. They will be exempted from Goods and Services Tax (GST), the report said, calling on authorities to grant exemptions. Niti Aayog said they do not need environmental clearance (EC) as the environment ministry has issued a draft notification exempting projects such as industrial sheds, schools, colleges and educational hostels from seeking environmental clearance.

Viability Gap Funding

Niti Aayog said developers can get viability gap funding from the federal government up to 30 per cent of the project cost (excluding land). It added that the Ministry of Economic Affairs will provide 20% of the funding and the sponsoring nodal department will provide 10%, using the same model as the “Infrastructure Public-Private Partnership Financial Support” program.

Niti Aayog said states must reform zoning and building regulations to access viability gap funds. “Mixed land use zoning should be allowed in industrial areas to allow for the construction of SAFE accommodation without restrictions. Alternatively, SAFE accommodation can be designated as a permitted land use within industrial areas,” the Niti Aayog report said.

A Viability Gap Grant is a financial grant or loan that helps make a project commercially viable when it is financially feasible but not financially feasible. The goal is to fill the gap between a project’s actual costs and its potential revenue.

lowest five floors

The think tank also called for the relaxation of the floor area ratio (FAR) to allow building heights to be determined based on cost-benefit considerations, saying buildings should have at least five floors.

Niti Aayog said that as India hopes to become a developed economy by 2047, the SAFE accommodation program is critical to create jobs. The manufacturing industry is expected to create approximately 120 million jobs by 2033.

Assuming that one in five workers will prefer affordable formal housing by 2033, the government will need to build about 25 million such housing units for manufacturing workers, Niti Aayog said.

“…structural changes in India could lead to rapid economic growth and a large population shift from low-productivity agriculture to high-productivity industrial jobs,” the report added.

Also Read | Industry needs to increase R&D spending, government capex growth expected to continue: Ficci

Niti Aayog noted that worker housing complements investments in education and training, permanently improving worker performance and productivity and reducing absenteeism.

The think tank noted that poor living conditions exacerbate workers’ health problems, as overcrowding and unsanitary conditions increase the prevalence of infectious and chronic diseases. Niti Aayog said substandard housing coupled with long commutes can lead to fatigue, reduce worker productivity and increase absenteeism.