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The CSR spending of the BSE 100 companies have gone up by almost 75 per cent to Rs 5,240 crore in 2014/15 compared to Rs 3,000 crore in the previous year.
However, in a report released by corporate governance advisory firm Institutional Investor Advisory Services India Limited (IiAS), the total spending in 2014/15 is still 26 per cent below the prescribed limit of 2 per cent spending of the three-year average pre-tax profits of the companies.
Under the companies Act 2013, it is mandatory for companies above a certain financial threshold have to spend at least 2 per cent of their average net profits of the preceding three years on corporate social responsibilities.
In a study of the pattern of spending by these companies, IiAS found that most of the money is being spent in projects related to hunger, poverty and health care (Rs 1,497 crore) and education (Rs 1,466 crore). Environmental sustainability and rural development-related projects attracted funds to the tune of Rs 540 crore and Rs 470 crore, respectively.
Many companies chose to contribute towards Prime Minister’s relief fund (Rs 61 crore) and some also contributed towards Swachh Bharat Kosh (Rs 47 crore).
Though the companies are supposed to spend 2 per cent of their average three-year net profit on CSR activities, the government has decided not to take any action against those which fail to do so. Instead, they have asked the companies to explain why they have failed to spend the stipulated amount.
According to IiAS report, public sector companies have been the worst performers with only 63 per cent (Rs 17,000 crore out of the stipulated Rs 27,000 crore) of the stipulated amount being spent on CSR activities.
Promoter-owned companies were the best performers with 85 per cent of the stipulated amount being spent on CSR activities.
The most common reason for failing to meet the mandated spending limit is “Funds committed but not spent”. As many as 22 companies cited this as the reason for their inability to comply with spending limit norms. As many as 18 companies have cited delays (in implementation, project identification, etc) as the reason for not meeting with the spending limit.
IiAS noted that “the regulatory framework for CSR is a step in the right direction as it encourages companies to broaden their remit beyond their immediate stakeholders. However, CSR needs to be sustainable for it to continue to enthuse corporates and to have meaningful long-term impact”.
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