BENGALURU (India CSR) : The government will frame a policy mandating public sector units (PSUs) to set aside 2% of profits as corporate social responsibility (CSR) funds, said MTB Nagaraj, minister for public enterprises.
Replying to queries in the legislative council on how PSUs in the state are spending CSR funds, Nagaraj said the government will soon introduce a law to ensure CSR funds are used for local requirements. “At present, there are no laws which mandate how PSUs should spend CSR funds,” the minister said. “As per provisions of the Companies Act 2013, PSUs registered under the Act must set aside 2% of profits as CSR funds. There is no requirement for sick units to set aside CSR funds. ”
There are 60 PSUs under 23 different departments in Karnataka. Currently, 34 PSUs have shown profits, while the other 24 are inactive or face bankruptcy proceedings, the minister said in reply to a query from KA Tippeswamy, MLC.
Under the Companies Act, every year, firms must spend at least 2% of the av- erage profit of the three preceding financial years on a CSR policy. Rules state the company must give preference to the local area where it operates from while spending the fund.
KT Srikantegowda, who pointed to a lack of policy on precisely how CSR funds should be used, said, “Many community halls were built with CSR funds, but they are hardly used. The government must draft a policy on the areas the funds can be used. ”
Tippeswamy, who spoke on the financial condition of PSUs, said some have paid taxes of over Rs 2 crore without making proper assessments. He said PSUs have no internal policy on what CSR funds can be used for. “PSUs must have a CSR policy and the government must issue guidelines for local area development,” he said.
He said that the Government will take action against those public sector enterprises that are not spending the mandatory 2% of their profits on CSR activities. “Administrative departments will also be issued directions. We will initiate a policy on CSR,” he added.
He added that public enterprises have been ignored by the government. Nagaraj revealed the Centre’s guidelines do not state PSUs have to utilise CSR funds for local gram panchayat works. “The state government will call for a meeting in this regard and draft a policy on how CSR funds will be used,” Nagaraj said.
Acknowledging that the Government has not kept tabs on CSR expenditure, the Minister said that the companies have not informed it where they have spent the money. He was responding to Janata Dal (Secular) members K.A. Thippeswamy and K.T. Srikante Gowda.
Earlier, quoting from the reply of the Minister, Mr. Thippeswamy said that of the 60 public sector enterprises, 34 were making profits. “Some loss-making enterprises are undergoing liquidation. Some of those in profits are under administrative departments and some others are under public enterprises department.” However, he pointed out, many companies have not even formed a policy on CSR, and that the Government needs to form a guidelines to mandate these companies on spending 2% on CSR activities.
