NEW DELHI: The government has issued show-cause notices to 1,018 companies for non-compliance of CSR norms even as a parliamentary panel has suggested putting in place a “stricter monitoring and compliance mechanism”.
Under the Companies Act, 2013, a certain class of profitable entities is required to shell out at least 2 per cent of their three-year annual average net profit towards corporate social responsibility (CSR) activities in a particular fiscal. The Standing Committee on Finance, headed by Congress leader Veerappa Moily, found that figures on CSR expenditure are quite disturbing.
Considering the not-so-encouraging compliance record, the committee may consider revisiting the CSR provision with a view to making it statutorily mandatory with penal consequences for non-compliance.
As many as 84 companies out of 226 PSUs and 411 out of 7,108 private entities have reported no expenditure on CSR in 2014-15. Moreover, companies that have reported CSR have not been spending it as per the guidelines.
“… such a laudable scheme aimed at releasing much needed funds for social development is not being complied with by more than 50 per cent of companies,” the committee noted.
The corporate affairs ministry has issued show-cause notices to 1,018 companies and certain firms are being identified for penal action, which would begin soon.
The committee said it is “not at all satisfied with the casual approach adopted by the ministry in making the non-compliant companies conform”.
It has suggested the ministry to put in place a stricter monitoring and evaluation mechanism to ensure CSR compliance by all companies as per the Companies Act. The panel has suggested that CSR expenditure of at least 50 per cent should be made in the local area, where the manufacturing or mining operations take place, another 25 per cent in the most backward regions including hilly areas and another 10 per cent in the North-East and Jammu and Kashmir.