Licence-Permit Raj for CSR

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By Sudeep Chakravarti

The end of September looms and several businesses in Chhattisgarh are getting antsy. If things go according to plan—the plan of the government of Chhattisgarh—they have to cough up funds by the end of the month for corporate social responsibility (CSR) directly to the government for disbursement by the government. Or else, businesses that enjoy various concessions from the state are liable to have such benefits yanked.

Raipur-Chhattisgarh-Map_0The move throws up several knotty issues, besides being redolent of the so-called Licence-Permit Raj. There is the danger of further intertwining of business and politics, and possible misuse of funds by government institutions. Moreover, with state elections due by December this year, such funds could be earmarked for areas to strengthen incumbency.

The plan was born of a certain dogged logic. It’s no secret that across India several businesses renege on commitments made at the time of land acquisition, and do not follow through on the delivery of such promises on matters related to resettlement and rehabilitation. Retraining, promised jobs, schools, enhanced health facilities in the vicinity of the project are sometimes left incomplete, or ignored once the deal is done.
It is also no secret—indeed it is abundantly visible—that several businesses heavily publicize their CSR achievements in electronic and print media and through outdoor advertising to influence public opinion. Unequivocally a tool of public relations, the CSR bang is often vastly greater than the buck on the ground.
The reworked companies law just weeks ago sought to streamline some of these aspects and mandated CSR spend and accountability on businesses of a certain size and record of profitability. Chhattisgarh went a step further, and earlier.

As the watchdog portal www.indiacsr.in mentioned in an opinion piece in August 2012, the collector of northern Raigarh district in Chhattisgarh came to the conclusion that big businesses operating in his district, which includes controversial new and renewed mining and power generation projects, among others, were either negligent or plain reneged on CSR commitments.

The collector at the time, Amit Kataria, set up a monitoring committee of bureaucrats. This committee sanctioned CSR plans of companies and also directed funds to certain projects in the district, like road works. Chief minister Raman Singh bought into the idea and, overriding reservations of local chapters of lobby groups like Confederation of Indian Industry, pushed through a state-wide plan. A revealing article in The Hindu newspaper on 16 September cited N. Baijendra Kumar, principal secretary to Singh, as estimating a Rs.1,000 crore accrual from such CSR funds.

In May, the government published in its official gazette the mandate of what is called the Corporate Social Responsibility Policy 2013. Both state-run and private businesses with an excess of Rs.500 crore in profit in the previous year need to pay up 2% of such profits with a minimum threshold of Rs.15 crore. Those with less than Rs.500 crore in annual profit need to pay 3% of such profits into the fund. Chhattisgarh State Industrial Development Corporation is both the repository and the router for such funds.

This is not the first, or only, instance of government trying to control funds of businesses. Earlier this year I wrote in this column about the experimental, and ongoing Saranda Action Plan, a pet project of rural development minister Jairam Ramesh to ride development on the back of security operations in one part of Maoist-hit West Singhbhum district of Jharkhand. The core of the plan is to aggregate and focus various government schemes. Steel Authority of India Ltd and Tata Steel Ltd, which operate iron mines in the district, were requested to contribute CSR funds and efforts as part of this experimental initiative.

Even a greenhorn CSR executive has tales of how MPs, MLAs and lesser, though no less insistent local politicians, seek to influence CSR spending to boost their own profiles. CSR-oriented functions often have locally important politicians as chief guests. In regions affected by Maoist and other conflicts, it isn’t unknown for businesses to contribute, through creative mechanisms, to work with state agencies to put down such conflicts. Such symbiotic, realpolitik relationships in the interest of bottom lines operate in the decidedly grey areas of corporate governance.

While the spectrum of payback or collusion is unsavoury, it’s another matter entirely for a government to co-opt CSR funds and make it a part of its development programme. Moreover, while in theory such a thing could work in a perfect world, the world of Chhattisgarh is far from perfect.

Sudeep Chakravarti is the author of Red Sun: Travels in Naxalite Country and Highway 39: Journeys through a Fractured Land. This column focuses on conflict situations in South Asia that directly affect business. Respond to this column at rootcause@livemint.com

(Sourced from Live Mint.com, 19 September 2013)

(URL: http://www.livemint.com/Opinion/D6X7guLtTKqpYMqzqAR0NK/LicencePermit-Raj-for-CSR.html)

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