NEW DELHI: As per the media report the corporate affairs ministry has cut by half its internal estimate of corporate social responsibility spending in the first year, in part because companies aren’t very enthusiastic to the idea.
The ministry now expects the eligible companies to spend about Rs 5,000 crore; its initial projection was more than Rs 10,000 crore. It has cut the estimate also after finding discrepancies in the data it relied upon.
Under new rules, companies with a net worth of more than Rs 500 crore or revenue of over Rs 1,000 crore or a net profit of more than Rs 5 crore need to spend at least 2% of the average net profit of the preceding three years on CSR activities. The ministry had estimated some 12,000 companies to come under CSR ambit and spend the funds on projects ranging from rural develop and education to art and culture.
“After we screened the data available, a lot of errors in the filings of several companies were found and the figure calculated was overestimated,” a government official said. “We don’t think the spending towards corporate social responsibility activities will be more than Rs 5,000 crore in the first year.”
The ministry also thinks many of the companies would wait and watch in the first year as there is no penalty if they don’t comply with the rule, though they have to explain the reasons for falling short.
The ministry is meanwhile considering provisions to penalise companies that fail to comply with the rule for two or more years. It was also initially planning to list online the companies that come under the CSR purview, but has now decided against making the data public.
To facilitate the companies which want to implement their CSR plan through non-government organisations, a list of NGOs is being made available on the website on the Indian Institute of Corporate Affairs.
Industry experts had initially estimated the corporate social responsibility spending to be Rs 15,000-20,000 crore. “But after interacting with several corporates, we understood not all of them would be spending the entire 2% amount in the first year. We expect CSR spending to be way less thanRs 15,000 crore,” said Sai Venkateshwaran, partner and head-accounting at KPMG in India.