NEW DELHI: Government of Jharkhand has asked all the industries working in the state to deposit 50% of their mandated CSR budget in an agency instituted by the state government. The government has written letters across the industries in this regard mentioning deadline of 25 October, 2016 for depositing amount. Govt. is also working to setup a society where amount to be deposited.
Decision of JCSRC Meeting: Formation of Society for CSR Fund
Giving the reference to decision taken in the meeting of Governing Body of Jharkhand CSR Council held on August 1, 2016 in the chairmanship of Chief Minister of Jharkhand, In an office order issued by Director Industry – Cum – Member Secretary, Jharkhand CSR Council, Dept. of Industries, Mines & Geology vide dated 4/10/2016 said, “…setting up of a society wherein the companies will deposit 1% of their profit out of the mandated 2% of profit to be spent on CSR as per the Companies Act 2013 and to deposit 1% each for the FY 2015-16 (i.e. unspent from the proposed CSR budget submitted to JCSRC) & FY 2016-17.”
“….Kindly inform us the amount to be deposited with Jharkhand CSR Council by your company before 25th October 2016.” Office order added.
Utilization of CSR Fund
“The money deposited with Jharkhand CSR Council will be used for government priorities to improve the lives of people of the Jharkhand state. This will increase the visibility of unitisation of CSR fund and would result in focused outcome. Society of Jharkhand CSR Council, formation of which is under process, will comprise representatives form Government and companies as members which plan, manage and monitor the utilization of the CSR fund.”, it also added.
Resolution Passed in JCSRC Meeting
Jharkhand Corporate Social Responsibility Council (JCSRC) Governing Body Meeting held under the Chairmanship of the Chief Minister, Government of Jharkhand on 1 August 2016 at Project Bhawan, Dhurwa, Ranchi, capital of the state. Minutes of Meeting not available in public domain or JCSRC website. During the meeting, JCSRC passed resolution that the Department of lndustries, Mines & Geology, Govt. of Jhakhand will set up a society wherein the companies will deposit 1% of their profit out the mandated 2% of profit to be spent on CSR as per the Companies Act of 2013.
“The companies have to deposit 1% each for the FY 2015-’16 (i.e. unspent from the proposed CSR budget submitted to JCSRC) & FY 2016-17. Companies have been asked to get back to the Govt. of Jharkhand with their board approvals in case needed on this suggestion within 1 month.”, minutes of the meeting said.
Allocation of CSR Funds and Utilization
It has mentioned in the minutes of meeting that the money deposited with JCSRC would be used for government priorities to improve the lives of people. Presently it would be used for making villages/Panchayats/Blocks/ULBs open defecation free under Swachh Bharat Mission. lt will also increase the visibility of utilisation of CSR fund and would result in focused outcome.”
Context and Estimates
There are a large number of companies including Central Public Sector Enterprises (CPSEs) operating in Jharkhand – mainly in steel, power, coal and other mining sectors – with a total annual turnover of over Rs. 60,000 crore in 2013. This amount is about one-third of the net state Domestic product of Jharkhand in 2013. (Economic Survey 2013-14)
Total annual Corporate Social Responsibility (CSR) budget in India is estimated at Rs 20,000-25,000 crore in 2014. Considering that the share of Jharkhand in the total CSR budget would be about 3-4%, the CSR funds of Jharkhand companies are estimated to be at Rs 600-800 crore per year. (Media reports)
Notification and Implementation
Govt. of Jharkhand has also notified ‘Jharkhand Gazette (Extraordinary), Wednesday, 8th April, 2015.’ on this subject.
ln FY 2015-16, Rs.754.03 Crores has been spent against the proposed CSR budget of Rs. 919.27 Crores by 27 companies in Jharkhand. This figure of CSR fund spent by the companies in FY 2015-16 has gone up by 3 times from Rs. 247.04 Crores in FY 2012-13. The allocation for CSR fund in FY 2016-17 is Rs. 602.14 crores by 26 companies in Jharkhand.
Emphasis on Collaboration for Development
Addressing the JCSRC Governing Body meeting Chief Secretary, Jharkhand said,”it is the responsibility of both government and corporates to work together to create a bigger impact. We need to focus on core issues as making the state open defecation free, curbrng malnutrition, quality education, sustainable livelihood, etc. lo move the state forward on various development parameters.” (Minutes of Meeting, August 1, 2016)
Understanding CSR and Concerns
According to the Company Act, 2013, Section 135, The CSR activities shall be undertaken by the company, as per its stated CSR Policy, as projects on programs or activities (either new or ongoing), excluding activities undertaken in pursuance of its normal course of business.
CSR is the process by wherein a company deliberates about and evolves its relationships with stakeholders for the wider good, and demonstrates its commitment in this regard by adoption of appropriate processes and strategies. After the CSR law in India, CSR is not charity or mere donations.
Responsible companies do not limit themselves to using resources to engage in activities that increase only their profits. They use CSR to integrate economic, environmental and social objectives with the company’s operations and growth. CSR is subject to the Board of the Company and board is accountable for the success or failure.
Critique on Government’s Approach
However the Corporate Social Responsibility personnel and industries feel the move by Government of Jharkhand as regressive in free interpretation and implementation of Schedule VII of the Company’s Act 2013. It may also influence other state governments or its agencies to follow the suit curtailing the freedom of the Board in deciding what’s best for the company and to the society.
Schedule VII of the Company’s Act 2013 has enough and more avenues to accommodate as many variety of social development projects, beyond donating to the Prime Minister’s National Relief Fund, to nurture and spread of non-government organizations in taking forward the development work. The Jharkhand Gazette (Extraordinary), mandating companies to contribute to an agency constituted by the government, indirectly overrules the Corporate Social Responsibility amendment to the Companies’ Act 2013.
Importance of CSR Culture
It is also important to note that CSR is not mere spending of the mandated amount but building a culture of business ethics and believing in doing good. The move by the Department of Industry, Government of Jharkhand would kill the original intention of
amendments to the Company’s Act 2013. Moreover, it is a clear case of cornering and pushing industries to aggregate the donation. It is high time that the government concentrates on the larger governance issues rather than eyeing on the profits of various companies.
About the author:
Rusen Kumar is the editor at India CSR, a watchdog portal on CSR, the world’s leading CSR Network
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