Guidelines on Corporate Social Responsibility for CPSES Issued

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Task Force on MoU for 2010-11 Constituted
Approval for Revival of 40 CPSES upto November 2010

CSR in BusinessThe Department of Public Enterprises being the nodal department for all Central Public Sector Enterprises (CPSEs) formulates policy pertaining to the role of CPSEs in the economy.

It lays down policy guidelines for performance improvement and evaluation, autonomy and financial delegation, personnel management and other related areas in respect of CPSEs. It also collects, evaluates and maintains information on several areas in respect of CSPEs. The DPE also acts as the interface between the various Parliamentary and Government organization and the CPSEs as a whole.

COUNSELLING, RETRAINING & REDEPLOYMENT SCHEME (CRR)
Department of Public Enterprises is implementing Counselling, Retraining and Redeployment (CRR) Scheme to provide opportunities of redeployment through counseling and retraining to separated employees of Central Public Sector Enterprises (CPSEs) rendered surplus as a result of modernization, technology upgradation and manpower restructuring in CPSEs.  Implementation of the CRR Scheme is through nodal training agencies which have been selected after ascertaining their capabilities to undertake such jobs. These nodal agencies conduct training programme through Employees Assistance Centres (EACs) located in many parts of the country.  From 2001-02 to 2009-10, around 1.55 lakh VRS optees have been trained and around 68,000 have been self-employed/redeployed.

During 2010-11, with plan fund of Rs. 8.90 crore, the target is to cover 9000 VRS optees.  12 agencies are on the job to achieve this target.  From April to November, 2010, 3200 VRS optees have been trained and training is in progress for 1400 employees. A sum of Rs. 5.54 crore has been released till November, 2010.

The Final Report on the Evaluation of CRR Scheme has been submitted by the consultant. The recommendations of the consultant have been circulated to all the nodal agencies, CPSEs and concerned administrative Ministries/Departments for compliance.

Corporate Social Responsibility for Central Public Sector Enterprises
The Department of Public Enterprises, Ministry of Heavy Industries and Public Enterprises have issued in April 2010, comprehensive “Guidelines on Corporate Social Responsibility for Central Public Sector Enterprises”.

The new guidelines lay stress on the link of Corporate Social Responsibility with sustainable development and define Corporate Social Responsibility (CSR) as a philosophy wherein organizations serve the interest of society by taking responsibility for the impact of their activities on customers, employees, shareholders, communities and the environment in all aspects of their operations.

Under these guidelines, the long-term CSR Plan should match with the long-term Business Plan of the organization.  The activities under CSR are to be selected in such a manner that the benefits reach the smallest unit i.e., village, panchayat, block or district depending upon the operations and resource capability of the company.

Under these guidelines the CPSEs are required to move from an ad-hoc approach to the project mode with specified time frames and periodic milestones.  The activities undertaken under CSR should also be in consonance and consultation with State Governments, district administration, local administration as well as Central Government Departments/Agencies, Self-Help Groups, etc., to avoid duplication.

Under these guidelines, CPSEs have to create mandatorily, through a Board Resolution, a CSR budget as a specified percentage of net profit of the previous year.  Expenditure range for CSR in a financial year is 3-5% of the net profit, of previous year, in case of CPSEs having profit less than Rs. 100 crore; 2-3% (subject to minimum of Rs. 3 crores) in case the profit ranges from Rs. 100 crore to  Rs. 500 crore and 0.5-2% in case of CPSEs having a net profit of more than Rs. 500 crore in the previous year.  Loss making companies are not mandated to earmark specific funding for CSR activities but may achieve this objective by integrating business processes with social processes, wherever possible.  The CSR budget has to be fixed for each financial year and the funds would be non-lapsable.

Under these guidelines special stress has been laid on the proper monitoring of the CSR projects undertaken.  The Boards of the CPSEs would be responsible for the implementation of the CSR activity which would then be a part of the annual MOU signed between CPSEs and the Government.  Also, there is a provision for appointment of Social Audit Committee and independent external agency for periodic monitoring as well as evaluation.

As per the provisions of the guidelines  a National CSR Hub has been set up by Department of Public enterprises at Tata Institute of Social Sciences (TISS), Mumbai to undertake/facilitate many activities relating to CSR, such as research and creation of a data base; advocacy; promotional activities; conferences/seminars/workshops, etc..

MEMORANDUM OF UNDERSTANDING (MoU)
The Memorandum of Understanding (MoU) is a mutually negotiated agreement between the management of the enterprise and Government of India.  Under this agreement, both sides come to a mutual understanding regarding the targets (both financial and non-financial) to be achieved by the enterprise in the ensuing year and the commitments to be fulfilled by the Government that are considered essential in fulfillment of those targets.

Constitution of Task Force on MoU for 2010-11
Task Force on MoU is reconstituted every year. In order to lend greater technical and professional expertise as well as diverse and rich experience to Task Force on MoU for the year 2010-11,  CPSEs were categorized into 11 syndicates in total; each syndicate having  6 members comprising 1 Convenor (Senior most among the members), 1 Administrative member (retired secretary to GOI), 1 Finance/ CA expert, 1 Ex-CMD of any CPSE, 1 renowned academician, and 1 domain expert. Thus, there are 66 Task Force members and one Chairman for the year 2010-11.

MoU negotiation
Of a total of 253 CPSEs, 203 CPSEs submitted draft MoUs to DPE.  DPE has arranged MoU negotiation meetings of the Task Force on MoU with CPSEs/administrative Ministries and thereafter authenticated draft MoUs of all these CPSEs.  41 CPSEs were exempted from signing MoUs, for reasons of being Shell Companies, not in operation, winding up/merger and Court cases.

MoU negotiation meetings in respect of 202 CPSEs were held in a record time between mid January 2010 to mid February 2010. The MoU exercise was completed before the budget session of the Parliament, and Results Framework Document (RFD) exercise to enable incorporation of the CPSEs’ commitments into the RFD of the respective administrative Ministries. Signed MoUs of 202 CPSEs have been received by DPE.

The MoU negotiation process has been made robust as a result of a number of new initiatives that were taken during the current year, which are listed below:

0      MoU Task Force was reconstituted to make it smaller, yet more effective, by bringing in younger administrative experts and professionals like ex-CMDs of CPSEs, domain and finance experts, academicians, etc.;

0      Clear and explicit MoU Guidelines defining financial terms consistent with those used in the Public Enterprises Survey were issued.  This has brought about predictability and uniformity in the process of target setting and evaluations.

0      Corporate Social Responsibility (CSR), R&D & Sustainable development were included in non-financial parameters with a mandatory 5% weightage each.  The choice of selection of individual dynamic parameters constituting 50% of weightage was left to the combined wisdom of the CPSE, Administrative Ministry and the Task Force. All parameters were required to be SMART (i.e. Specific, Measurable, Attainable, Result-oriented, Tangible) and objectively verifiable.

0     DPE prepared informed critiques containing background information on the CPSEs and CMIE’s industry-wise projection for growth in the following year and shared them with the CPSEs as well as Task Force members in advance.  These critiques were found to be very useful in facilitating focused and informed discussions during the negotiation meetings.

0      A new website http://dpemou.nic.in was launched where all MoU related information has been documented for the benefit of all the stakeholders.

Benefits of MoU system
MoU System is a major policy initiative of the Government of India in facilitating the empowerment and enhancing the performance levels of the Central Public Sector Enterprises (CPSEs).  MoU system has shown the desired results in the form of improved performance of CPSEs and increase in their operational autonomy.

By laying emphasis on marketing effort and comparing with private sector enterprises MoU system is helping CPSEs to face competition.  There is a perceptible increase in efforts of CPSEs in projects/activities relating to Corporate Social Responsibility, Research & Development, Sustainable Development and Human Resource Management etc.  The discussions during the performance review meetings undertaken by the Ministries have become more focused with the introduction of MoUs.

PUBLIC ENTERPRISES SURVEY
During the year 2010 (January-till now), following activities were undertaken in the Survey Unit:

(i)  Standing Committee of Principal Secretaries / Secretaries of Bureau of Public Enterprises / Nodal Divisions on State Level Public Enterprises (SLPEs) in States & UTs under the chairmanship of Secretary DPE has been constituted.

(ii)   The data on Public Enterprises Survey (2008-09) has been posted in a user friendly manner on DPE’s website as per RFD requirement of the Department.

(iii)  To propagate the issues relating to MIS, Corporate Governance, MOU system and Corporate Social Responsibility (CSR) in State Level Public Enterprises (SLPEs), Zonal Workshops are being organized and are proposed to be conducted in the different zones / regions during the year.

MANAGEMENT
In respect of Management Division, the following significant achievements have been made during the year 2010.

a)      Introduction of Maharatna Scheme for empowerment of CPSEs in February, 2010 and grat of Maharatna status to 4 CPSEs namely (i)Indian Oil Corporation Limited, (ii) NTPC Limited, (iii) Oil & Natural Gas Corporation Limited and (iv) Steel Authority of India Limited in May, 2010.

b)      Grant of Navratna status to Oil India Limited and Rashtriya Ispat Nigam Limited in April, 2010 and November, 2010 respectively. Presently, there are 16 Navratna CPSEs.

c)      Implementation of Guidelines on Corporate Governance for CPSEs on mandatory basis in May, 2010.

d)      Implementation of new guidelines and format for writing Annual Performance Reports of top management incumbents of CPSEs in April, 2010.

BOARD FOR RECONSTRUCTION OF PUBLIC SECTOR ENETRPRISES (BRPSE)
Government set up a Board for Reconstruction of Public Sector Enterprises (BRPSE) in December, 2004 to advise the Government, inter alia, on measures to be taken to restructure / revival of sick Central Public Sector Enterprises (CPSEs).

Recommendations of BRPSE:
During the last 11 months ending November, 2010, 9 meetings of BRPSE have taken place. During this period, the Board had considered the proposals of 6 CPSEs and given its recommendations for revival of 5 CPSEs namely (i) North Eastern Handicrafts and Handlooms Development Corporation Ltd.,(ii) Hindustan Photo Films Manufacturing Company Ltd.(iii) National Film Development Corporation Ltd. (NFDC),(iv) British India Corporation Ltd. (revisited case),(v) Scooters India Ltd. (SIL) and  remitted the case of ITI Ltd. to the concerned administrative Ministries/Departments for resubmission.

Since the inception of BRPSE in December, 2004 and till November, 2010, the Board has held 85 meetings. The Board has considered proposals in respect of 67 CPSEs and given its recommendations for revival of 59 CPSEs and closure of 3 CPSEs and remitted 5 cases to the concerned administrative Ministries/Departments for resubmission.

Approval of the Government on the recommendations of BRPSE:
During the last 11 months ending November, 2010, based on the recommendations of BRPSE, Government have approved revival of 3CPSEs viz. (i) National Jute Manufactures Corporation Ltd., (ii) Burn Standard Company Ltd., and (iii) National Film Development Corporation Ltd. involving total assistance of Rs.8338 crores (cash assistance of Rs.355 crores and non cash assistance of Rs.7983 crores) from Govt. of India.

Government have, till November,2010, approved for revival of 40 CPSEs envisaging total fund/non-fund based assistance of Rs.23591 crores (cash assistance of Rs.3289 crores and non cash assistance of Rs.20323 crores) from Govt. of India.

Performance of these CPSEs
11 CPSEs, among the 40 CPSEs approved for revival, have posted profit consecutively in 2006-07, 2007-08 and 2008-09.

PERMANENT MACHINERY OF ARBITRATION  (PMA)
Permanent Machinery of Arbitration (PMA) has been set up in Department of Public Enterprises (DPE) for resolving commercial disputes, except taxation and Railway between CPSEs inter-se as well as between a CPSE and a Central Government Department/ Ministry, Banks, Port Trusts expeditiously out of court.

The disputes are required to be referred to Secretary, DPE who nominates the Arbitrator of the PMA, a Joint Secretary & Lagal Adviser of Law Ministry appointed by Law Secretary, for Arbitration to decide the dispute of the parties. The Arbitration Act, 1996 or any other law is not applicable in the PMA. Award of the Arbitrator may be challenged before the Law Secretary whose decision is final and binding upon the parties. The decision of Law Secretary is not challengeable in any Court of Law. The matter is presented/ defended only by the representative of the parties and not by any Lawyer or outsiders.

PMA guidelines are revised time-to-time. The PMA is designed to be self-supporting and hence the PMA charges and Arbitration fees   worked out on th formula given in the guidelines. The Arbitrator shall make his award within six months after entering upon the reference or within such extended time as the parties may allow. Ever since the PMA was created in 1989, the Secretary (PE) has referred 256 cases to the Arbitrator out of which 202 Awards have been published.

PMA time-to-time issued instructions to all the Ministries/ Departments concerned with the parties for strict compliance of the Award and monitoring implementation of Award of the Arbitrator.

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