New Delhi: Social spending by companies mandated by law plunged by a sharp 64.24% in the pandemic year of 2020-21, official data showed, as contributions towards corporate social responsibility slumped to ₹8,828 crore compared to ₹24,689 crore spent in the preceding financial year.
The number of companies engaged in CSR activities dropped by about 93% on an annualised basis at 1,619 in 2020-21, compared to 22,531 a year ago, as per data on the CSR portal of the corporate affairs ministry sourced from directors’ reports and forms filed by companies as on September 30, 2021.
The disruption caused by the Covid-19 pandemic and challenges in vetting organisations and projects to fund are among the reasons for the fall in CSR spending, experts said. The earmarked funds can be utilised once these obstacles are removed.
Reliance Industries maintained its pole position in social expenditure, with an enhanced ₹922 crore contribution in 2020-21 compared to ₹908.71 crore spent in the preceding financial year. Tata Consultancy Services remained the second largest spender with ₹674 crore compared to ₹602 crore earlier.
State-run energy major Oil and Natural Gas Corporation, however, lost its third position in 2019-20 with a CSR spend of ₹582.07 crore, and slipped out from the list of top 10 contributors in 2020-21.
It is mandatory in India for companies with a net worth of at least ₹500 crore, or revenue of ₹1,000 crore, or net profit of ₹5 crore, to spend a minimum 2% of their average net profit booked in the three preceding financial years on welfare activities.
The combined expenditure of state-run firms in 2020-21 was a mere 6% ( ₹561 crore) of the total ₹8,828 crore spent on CSR activities, while private firms contributed 94%. However, in the previous financial year, the combined contributions of public sector firms was ₹5,242 crore, which was 21% of the total ₹24,689 crore spent, according to official data.
Since 2014-15, the combined CSR expenditure by enterprises are about ₹1.10 lakh crore. ONGC and the ministries of corporate affairs, finance and petroleum did not respond to emailed queries on this matter.
“It may possible that the numbers could be revised later as some companies may file details of their CSR activities late due to disruptions caused by the Covid-19 pandemic,” a government official said, requesting anonymity.
There could be multiple reasons for the decline in social spending by companies, experts said.
The fall in numbers is possibly because most of the designated funds are parked in bank accounts for future use, according to Saguna Sodhi, partner, forensic and integrity services at consultancy firm EY.
Any unspent amount from the CSR budget can be transferred to an appointed bank account within 30 days from the end of a financial year, and can be used within the next three financial years.
The spread of Covid-19 in 2020-21 could be another reason, she said. “In the previous financial year, during the initial lockdown period of 6-7 months, most CSR funds were re-routed to the PM Covid relief fund, with companies not being able to take up planned on-ground activities,” Sodhi said. “However, when the unlocking started, it was gradual and took place in a phased manner that might not have been conducive to starting the projects as planned.”
CSR compliances are cumbersome, which could have been another reason for the delay, Sodhi said.
“CSR spending as per the budget allocated is mandatory, not optional. However, with increased emphasis on compliance regulations and board liability, companies now have focused committees to determine the projects that best align with their ethos and allocate appropriate budgets toward that,” she said. “A lot of energy is being invested in setting up a process to vet third parties before funding projects.”
Another deterrent that may have impacted the number of companies declining could be the amendments made in January 2021 in the CSR rules under which eligible implementation agencies had to mandatorily register with the government and obtain a CSR registration number before they could accept funds, she said.
“A lot of NGOs got de-listed during the 2019-20 and 2020-21 period and there was a decline in available implementation partners for funding,” she said. (Source: Hindustan Times)
