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NITI Aayog Releases Report on “S.A.F.E. Accommodation: Worker Housing for Manufacturing Growth”

Context

The NITI Aayog report emphasizes the need for secure, affordable, flexible, and efficient (S.A.F.E.) housing to boost India’s manufacturing growth by addressing workforce retention and productivity challenges.

The Union Budget 2024-25 highlights rental housing initiatives under a PPP model.

Addressing worker accommodation gaps is key to India’s manufacturing aspirations.

Introduction

• The report by NITI Aayog emphasizes the importance of secure, affordable, flexible, and efficient (S.A.F.E.) accommodations for industrial workers in enhancing India’s manufacturing sector.
• In the Union Budget 2024-25, the Finance Minister highlighted rental housing with dormitory-style accommodations under a Public-Private Partnership (PPP) model, supported by Viability Gap Funding (VGF).

India’s Manufacturing Aspirations: Vision for Viksit Bharat

• Manufacturing Goals: India aims to increase the manufacturing sector’s contribution to GDP from 17% to 25% by 2047 under initiatives like Make in India and Atmanirbhar Bharat.
• Workforce Needs:
  • The Economic Survey 2023-24 projects India must generate 7.85 million jobs annually until 2030, with manufacturing as a significant contributor.
  • Large-scale factories require centralized workforce housing, primarily for migrant workers.
• Current Challenges:
  • Inadequate housing near industrial hubs causes high attrition rates, reduced productivity, and workforce instability.
  • Housing scarcity restricts migration, especially for women, limiting the sector’s growth.

Why S.A.F.E. Accommodation Matters

• Enhancing Productivity and Retention: Proximate, well-designed housing improves quality of life, reduces commute times, and stabilizes the workforce.
• Attracting Global Investments: High-quality accommodations showcase India’s commitment to international standards, enhancing its appeal as a manufacturing destination.
• Aligning with Global Labour Standards: Adherence to international standards boosts India’s global competitiveness and strengthens partnerships with multinational firms.
• Win-Win-Win Scenario:
  • Workers enjoy improved living conditions and higher satisfaction.
  • Companies benefit from workforce stability and reduced costs.
  • The government achieves sustainable development and increased investments.

Challenges in Scaling Up Worker Accommodation

• Restrictive Zoning Laws: Residential development is often prohibited in industrial zones.
• Conservative Building Bye-Laws: Inefficient regulations like low Floor Area Ratios (FAR) limit housing capacity.
• High Operating Costs: Classifying worker accommodations as commercial establishments increases taxes and utility costs.
• Financial Viability Issues: High capital costs and low returns deter private sector participation.

Proposed Regulatory Recommendations

• Reclassify Worker Accommodations: Designate them as residential housing to enable lower tariffs and GST exemptions.
• Streamline Environmental Clearances: Include S.A.F.E. accommodations under existing exemptions for industrial sheds and hostels.
• Promote Gender-Inclusive Policies: Develop housing that addresses specific safety and welfare needs for workers.
• Flexible Zoning Laws: Allow mixed-use developments near industrial hubs.

Proposed Financial Recommendations

• Viability Gap Funding (VGF): Provide 30%-40% project cost support, with contributions from the Department of Economic Affairs, nodal ministries, and state governments.
• Competitive Bidding: Use transparent processes to allocate VGF support effectively.
• Retrofitting Existing Facilities: Upgrade brownfield worker accommodations for enhanced safety and utility.

Conclusion

• S.A.F.E. accommodations are critical for workforce retention, productivity, and global competitiveness, contributing to India’s vision of Viksit Bharat.
• Collaboration among stakeholders—government, industry, and private developers—is essential to making these accommodations a reality and unlocking India’s manufacturing potential.