Hindu Business Line: New Delhi:
Wednesday, July 20, 2016.
India Inc’s
commitment towards corporate social responsibility remains shaky, as companies
give flimsy excuses for not meeting their legally mandated obligations.
To an RTI
filed by BusinessLine seeking information on the number of companies which have
given reasons to the government for not spending on CSR, the Ministry responded
by saying, “CSR expenditure of 460 listed companies, which have placed their
annual reports on their websites, indicates 51 Public Sector Undertakings
(PSUs) and 409 private sector companies together spent about ₹6,337.36 crore on
CSR during 2014-15.”
According to
the Ministry of Corporate Affairs, these 460 companies have cited reasons for
either not spending at all or not meeting the minimum criteria on CSR in
2014-15. The reasons included adoption of long-term CSR programmes/projects,
and difficulty to find suitable implementing agency.
A CII
spokesperson told BusinessLine, “These reasons don’t seem to be genuine or bona
fide. If they were serious about spending, they would have done it. One can’t
buy the argument that they were unable to spend on CSR as it was the first year
of implementation of CSR legislation.”
At present,
under the Companies Act 2013, the Rules on CSR state that every company having
a net worth of ₹500 crore, or having a turnover of ₹1,000 crore, or making a
net profit of ₹5 crore during a financial year shall ensure that at least 2 per
cent of the average net profits made during the three immediately preceding
financial years is spent on CSR.
The companies
are also mandated to set up a committee to oversee CSR activities.
The rules
also mandate that if the company fails to spend the amount, the board shall, in
its report, specify the reasons for not doing so. According to the Ministry, 16
per cent of 460 companies have given no reason for not spending on their CSR
obligation.
As many as 30
per cent of the companies stated ‘adoption of long-term CSR
programmes/projects’ as the reason for not meeting their obligation. About 28
per cent expressed inability to formulate well-conceived CSR policy as it was
the first year of implementation.
While 5 per cent
mentioned ‘budget advanced to implementing agencies’, 4 per cent said there was
difficulty in finding a suitable implementing agency.
There are
stringent penalties for companies not disclosing their CSR spends. Companies
can be fined a sum not less than ₹50,000 and extending up to ₹25 lakh.
Also company
officials who are in default can face imprisonment which can extend to three
years or be fined ₹50,000 to ₹5 lakh.
The CII
spokesperson said, “Next year should see higher compliance. There are
consequences of non-compliance, the company may get flak from FIIs, bankers.
Shareholders also read annual report and this has an overall impact.”