CSR Funds: Kuber Ka Khajana? I India CSR

By Suresh Kr Pramar

Indiacsr Readers are likely to recall the furious debate, a few years ago raging in the Corporate world over Corporate Social Responsibility. Indian Inc had strong reservations on a whole lot of issues being raised by the government and CSR experts on the concept. Among the main, opposition was strong against making CSR mandatory, an idea which was then being promoted by the government.

Corporate Leaders’ View on Mandatory CSR

According to Corporate leaders, mandatory CSR would be another form of tax being levied on the over-taxed Corporate sector. It was pointed out that the Corporate sector was doing more than its due to implement the various provisions of CSR, voluntarily. Mandatory CSR, Corporates pointed out, would provide politicians and bureaucrats a means to pressure them to invest in areas where they did not have core competencies.

Opposition from Prominent Figures

Wipro Chairman, Azim Premji, who has personally contributed enormous sums to community development, was opposed to the mandated spending. He said: “My worry is the stipulation should not become a tax at a later stage …” Rohini Nilekani, a philanthropist and wife of Nandan Nilekani, said “mandatory CSR over and above taxation, forces companies to do the government’s job. And trying to outsource the state’s primary job is a bad idea.”

Parliamentary Committee’s Recommendation

The issue was clinched after a Parliamentary Committee recommended that CSR be made mandatory. The standing panel on finance, headed by former finance minister Yashwant Sinha, recommended to the government to make corporate social responsibility (CSR) spending mandatory for companies above a certain threshold. The argument was that companies were not doing enough voluntarily for the welfare of the people.

Government’s Decision on Mandatory CSR

India Inc fought hard but ultimately the government prevailed and carried the day. However, as a concession to India Inc, the government issued a list of activities which could be funded under CSR and business has the option to choose from the same. Thus CSR became both mandatory and voluntary. Mandatory because companies had to spend the stipulated amount on CSR and voluntary because they were allowed to choose the activity they would like to take up.

Misuse of CSR Funds by Politicians

Among the reason was the fact that several politicians, in power and out of power, were exerting pressure on PSUs and private corporates to fund their pet schemes. One minister, then in power, had made the Department he was heading divert a substantial part of its CSR funds to build akharas (wrestling pits) in his constituency. Another has used CSR funds to create public parks etc. in his constituency.

Demands from Bureaucrats

Babus were not too far off in making their own demands. In their case, it was personal. Like having the PSUs replace worn-out office or residence carpets. Providing air conditioners and smartphones. Another who later went on to become the kartha dharta of CSR, directing CSR activities Pan India, had one of the more important PSUs foot the bill for his wife’s travel and stay in one of the South East Asian countries.

Government’s Role in Diverting CSR Funds

Over the past two years, with the present government at the helm of affairs crores upon crores from the CSR funds have been diverted to activities which rightfully should have been run and financed by the government. As Rusen Kumar, Founder and Managing Editor-India CSR rightly points out “it would seem that the government is transferring all its economic development responsibilities to the Corporate Sector.”

Ineffectiveness of Government-Sponsored Schemes

In recent years there has been much discussion about financing the government-sponsored schemes like Swatch Bharat and construction of toilets by the corporate sector, both state and private. Glowing reviews have appeared in the media about the success of these programs. What these reviews fail to reveal is that while several crores have been spent the impact has been very insignificant. Despite the large expenditures, from CSR funds, our cities, big and small, continue to fester in dirt and muck. Toilets built in the rural areas have already been converted into cattle sheds or granaries.

The Real Intent of Corporate Social Responsibility

All these have made a hash of the real intent of Corporate Social Responsibility. Though there is no universally accepted definition of CSR, it is understood that it is meant to help those who have been impacted by the presence of business. Companies have to consider their impacts on the stakeholders and to undertake economic activities which will help reduce the impact and make their lives better.

Expected Use of CSR Funds

It was expected that business houses would use CSR funds to provide jobs, impart skill training, set up schools and medical centers for the poor. Most of these activities come under the purview of governments. They have been neglected over the years because of improper planning and implementation.

Government’s Shift of Social Welfare Responsibilities

Little by little the government has been shifting its social welfare responsibilities to the corporate sector. CSR funds have been treated like Kuber Ka Khajana to be dipped into whenever required. State government officials have been pushing corporates to undertake activities which have been identified for them to perform. In Chhattisgarh, the state government forest department on a regular basis directs corporates to undertake tree plantation drives. One is not sure what they do with the funds allotted in their department budgets, possibly feather their pockets.

CSR and Rural Welfare

Generally it is expected that a large part of the CSR funds with corporate bodies should be spent on the welfare of the long deprived rural families, in particular tribal families who have been the hardest hit by the wave of industrialization in the country. The states which today boost of high rates of industrial growth are the ones which have pauperized tribals the most. Not only have their lands been acquired for industries they have been left to fend for themselves with no means of earning a livelihood.

Rural Demographics and CSR Initiatives

Rural India has a population of 700 million people spread throughout 6,38,000 villages. Thus more than 60 per cent of India’s total population is rural by nature ‘Community services’ initiatives entailed activities that focus on the underprivileged that lives around the vicinity of the company or its plants. They facilitate educational and health care activities and support projects that result in employment generation. The other most sort out CSR initiative followed by industrialists relates to creating enlightenment among the youth

Economic Impact of Industrialization on Rural India

All across rural India the economic deprivation has grown with the move to Make in India. Government are acquiring land belonging to the villagers for industries at prices which cannot sustain them and their families for more than a few years. These are the people for who Corporate Social Responsibility was created. It was expected that the industries which have impacted these population would create welfare schemes which will improve their living conditions and not throw them to the streets with no means of income.

CSR Expectations vs. Reality

This has not happened as much as required. Matters are becoming worse with states and central government asking business to invest in schemes which do not benefit these deprived people. The latest example is the recent government directives had corporate should set up innovation centers to strengthen Make in India programme.

Misuse of CSR Funds by Governments

Governments, centre and states, are using CSR outlays like as if it is Kuber Ka Khajana to be dipped into whenever desired. CSR funds have a specific purpose and can be spent to finance welfare projects for the benefit of the impacted poor and deprived. Not for all and sundry projects which come to the fancy of the government and its bureaucrats.

CSR Activities Defined by the Company’s Act

In the Company’s Act the government has set out a list of activities which corporate can take up their CSR Agenda. The list contains activities which are closely related to the welfare of the rural and urban poor. In the past year several governments have been pressuring business to use CSR funds to finance projects which are not of direct benefit to those impacted by the presence of the unit.

Government Pressures on CSR Funds

In recent years government and its bureaucrats have been pushing corporate to finance several activities which should otherwise by financed through government funds. There have been demands to use CSR funds to finance projects like Smart cities development, creating of incubation centers and many more.

Impact of CSR Diversion on Rural Population

The diversion of CSR funds affects the rural population hard. They are hit twice over. In the past few years governments have been brutally cutting budgets for agriculture and social welfare schemes. With well over 70 percent of the families in the rural India directly and indirectly dependent on agriculture these cut back in agricultural outlays have been having a major impact. A substantial number of farmers have given up agriculture because it is not paying and have moved to the cities.

Misaligned Government and Corporate Priorities

CSR funds which could have been used to take up projects in agriculture and to create assets for the welfare of the people have been misused. Though government tries to project a pro farmer, pro poor image in reality it is bending over backward to appease the rich and influential industrialists. Business houses are likewise willing to bend to every request from bureaucrats and politicians to retain their place in their good books.

The Importance of Agriculture and Rural Development

Agriculture is the back bone of every nation as are those who live in the rural areas. No nation can aspire to be rich and strong if it ignores the needs of the core population of the country. Rural India is India’s core which needs to be nourished and developed. Time our leaders understand this Saccha truth.