Calling sectors like education, health, environment and rural development as “low hanging fruits”, Ravi Narain, a Mumbai-based CSR consultant, said that most big corporations are working in these areas, which are strategically important to their business operations.
As an example, Narain said that India’s top companies are energy companies which were conducting CSR operations in environment sector.
Narain is the co-founder of Amana Development Consulting Pvt Ltd.
The Companies Act 2013 prescribes 17 areas of CSR activity in Schedule VII of the act. Section 135 of the Act lays down rules for CSR activity in India.
The policy which became effective from 1 April 2014, mandates those companies for CSR activity which have net worth of 5 billion rupees or more; or turnover of 10 billion rupees or more; or net profit of 50 million rupees or more during any financial year.
The companies are required to spend at least 2% of the amount of the net profit for the last 3 financial years.
A Ministry of Corporate Affairs (MCA) data shows that for the financial year 2014-15 (April-March), the overall allocation of CSR funds by companies (public and private) for education, health, environment and rural development were 32% (27.28 billion rupees), 26% (22.46 billion rupees), 14% (12.13 billion rupees) and 12% (10.17 billion rupees) respectively.
The MCA data shows an abysmally low CSR spending towards activities like ‘Contribution to corpus’ (0.21% or 180 million rupees) and ‘Clean Ganga Fund’ (0.22% or 190 million rupees).
There are other areas like women empowerment, slum development, sports promotion, arts & culture which have not fared well.
There is not much encouragement from the corporate sector on women education and skill development, Ranjana Kumari, Director, Centre for Social Research (CSR) said. CSR is a non-profit organization based out of Delhi.
Another startling statistics is the concentration of funds in 4-5 states. The biggest beneficiaries of CSR spending during this period were Maharashtra (11 billion rupees), Tamil Nadu (4.47 billion rupees), Karnataka (3.63 billion rupees), Gujarat (2.92 billion rupees) and Chhattisgarh (2.75 billion rupees).
Meanwhile, states/union territories like Lakshadweep, Sikkim, Tripura, Mizoram and Nagaland were the worst beneficiaries with only a few hundred-thousand rupees in CSR spending.
Another CSR consultant Sunder Mahendra said large Indian companies had most of their business operations in these 5 states, making them preferred destinations for CSR activity, a point also made by Narain.
Both were of the view that the law encourages the companies to undertake the CSR activities in the region of their operations. The companies find it easy to channelise the resources in the regions they work, they said.
Mahendra is a principle consultant in a Gurgaon-based company NivAd.
Smaller NGO’s working in areas other than education, health, environment and rural development or in other geographies do not have the capacity and networking ability to promote other areas of CSR activity or bring CSR money in other geographies, Mahendra further said.
The MCA data points to another big problem. Out of the 10,475 companies that were eligible for CSR activity in the financial year 2014-15 (April-March), 4,195 companies did not spend on CSR activity, at all.
While 7,334 companies reported to the government as of 31 January 2016, only 3,139 companies spent towards social responsibilities.
At the rate of 2% of the profits, the prescribed expenditure for these 3,139 companies during the period was 118.83 billion rupees. The companies spent 88 billion rupees, in aggregate, accounting for a 76% actual spends.
The top-ten Indian companies – including Reliance Industries Ltd, ONGC Ltd, Infosys Ltd, Tata Consultancy Services Ltd, ITC Ltd, NTPC Ltd, NMDC Ltd, Tata Steel Ltd, ICICI Ltd and Oil India Ltd accounted for 32% (27.83 billion rupees)of the spending. Reliance was the only company to have spent more than the prescribed budget.
Kumari said that the government will have to show more seriousness for better implementation of the law. She said that the government has identified different areas for CSR activity, it would be for a reason.
It is worrying that most areas of CSR activities are being overlooked, she said.
Kumari even suggested that the government to bring a white paper to assess how top companies were spending their CSR funds and how the beneficiaries were benefitting, alleging foul play. Top companies were creating foundations and rerouting the companies through these foundations, she said.
The MCA data for the financial year 2015-16 shows 5,097 companies spent 98.22 billion rupees towards CSR.
While the number of companies complying with the law was more, this publication cannot predict if it is higher in percentage terms, as there is no information about the number of companies eligible for CSR activity and the prescribed expenditure. There is no data for financial years 2016-17, 2017-18 and 2018-19.
MCA declined to comment.