KEY POINTS
- The flexibility available to companies under the 2021 amendment allows them to plan multi-year projects and transfer unspent amounts, which can help in the effective utilization of India CSR funds.
Overview of Corporate Social Responsibility (CSR) Spends in India
Corporate Social Responsibility (CSR) is an essential element of the business landscape in India. The CSR law mandates companies with a net worth of over Rs 500 crore to spend 2% of their average net profits of the previous three years on CSR projects. In the financial year 2021-22, India Inc spent Rs 14,558 crore on CSR projects, which is marginally lower than the previous year’s spending of Rs 14,615 crore. However, the number of companies under the CSR universe increased to 1,278 from 1,251 in the previous year, as per an analysis of CSR spending by NSE-listed companies.
Flexibilities Available to Companies for CSR Spends
Companies can defer their CSR funds for a period and support multi-year projects under the flexibilities available to them according to the 2021 amendment. If companies fail to spend the allocated amount in a specific financial year, they can transfer the unspent amount from an ongoing project to a separate bank account and utilise it in the next three years. For the uncommitted CSR budget, the money may be transferred to funds specified in Schedule VII of the Act within six months of the end of the financial year.
Top Areas of CSR Spends
According to Prime Database MD Pranav Haldea, healthcare and education continued to be the top areas for CSR spending, garnering nearly 60% of the total CSR spends in FY22. Another area that gained prominence is the newly-introduced schedule of disaster management. The introduction of this schedule indicates that companies are increasingly focused on disaster management and recovery measures.
Trends in Per Capita Project Expenditure
Shivananda Shetty, head of ESG advisory at KPMG in India, said that companies are formulating multi-year projects of higher value, and the average per capita project expenditure is showing a positive trend. This trend indicates that companies are increasingly focused on executing larger projects that have a more significant impact on society and are more sustainable in the long run.
