CSR spending: 16% of firms give no reason for not meeting obligations

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NEW DELHI: Business Line reported that 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 Rs 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, “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 Rs500 crore, or having a turnover of Rs1,000 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 Rs50,000 and extending up to Rs25 lakh.

Also company officials who are in default can face imprisonment which can extend to three years or be fined Rs50,000 to Rs5 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.”

(Business Line, 19 July 2016)

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