No breach of trust on CSR norms: Veerappa Moily

Corporate Affairs Minister, Veerappa Moily, in an exclusive interview to CNBC-TV18 said there is no breach of trust with the Parliamentary Standing Committee as far as the Companies Bill is concerned. The Companies Bill has provisions included which relax Corporate Social Responsibility (CSR) norms.

According to him, the culture of CSR has not been imbibed among the Indian corporate structure. He referred to the culture of CSR as a social business and said investment in this social business will help the industry move ahead.

He added,  Corporates will have to spend 2% on CSR. However, if profits are inadequate, an exit strategy can be looked into.

Below is a verbatim transcript of his exclusive interview with CNBC-TV18 s economic policy editor Siddharth Zarabi.

Q: The parliamentary standing committee, which had looked into the Company s Bill, recommended after acceptance from your ministry, a mandatory provision of 2% CSR. After your ministry received industry feedback, the proposed draft cabinet note provided an option of sorts which in some ways dilutes this matter. The feedback that we are picking up from members of this standing committee is that this would amount to a breach of trust because this provision was included only after the ministry agreed to that proposal, what are your thoughts on this matter?

A: CSR is an important segment of the new Companies Bill. I was told that my predecessors had gone into these matters and had series of discussions with corporate bodies. I have been given the impression that the present formula which is included has been by and large agreed by them. I have seen that a 2% mandate is there, but there are some provisions which say, wherever there is no adequate profit made by them and there are enough reasons to justify that they will not be in a position to meet with the demand or aspiration of 2%, they may have to bring it to the notice of the ministry. This is what I am told, but I can t say the exact words.

There is no such thing as a breach of trust that is a very big word to be used. So whatever recommendations are made by the standing committee of the Parliament and the discussions held with the industry, we would like to go by that. If there is any fine-tuning which is necessary to strengthen the concept of CSR, that only I may revisit, otherwise no.

Q: How valid is it for a government to regulate, decide, frame a law telling a private company where to spend its profits because shouldn t it be less independent? You said – while it may be mandatory, there is also in some ways an exit clause. That will give some discretionary powers to some ministry officials which could be abused as well. Why can’t the government of the day trust its titans who are trusted all over the world?

A: You should understand that CSR culture as such has not been built into the corporate structure. If you look at any of the advanced countries, CSR is part of their culture. That rather dominates the entire business world. In 1961, when John F Kennedy was the US President he took several steps forward and introduced affirmative action and he kept big awards every year. Procter and Gamble who won the award sometime then, came out and said – affirmative action is a good business.

Just imagine the extent to which the corporate bodies cooperated. Even after 60-62 years of independence, if you are not in a position to imbibe that kind of culture or penetrate that kind of culture in the investment space, then somewhere we are not going with the global mainstream. In India, there are as many as 300 districts that are backward, where no industry will go and no investment can be done.

Basic facilities like drinking water, healthy environment, basic infrastructure, these are just not available. Do you think India can go on like this? That is why it is difficult to take industry and investment in those areas because of the unrest and the social conflicts.

I would say it is not exactly a corporate social responsibility. I would rather term it as a social business. If our industries and corporate bodies take this in the right spirit, as a social business that investment in social business will definitely augment their investment potential. Language is not a question but ultimately it is the intent where they will also be equal beneficiaries. We must think that when society benefits investors also benefit, when society benefits country will also benefit.

If that kind of a spirit is taken on by us all, this conflict will not be there. When you go to the land acquisition there is a conflict. When the Mangalore Oil refinery was to be put up, for 12-13 years they could not put up their industry. License was about to expire, they were about to go out, then I became the Chief Minister, then I said what is your problem? They said they were not prepared to give adequate compensation.

At that time, I worked it out in such a way that Aditya Birla he took over the oil license, they wanted the market rate. I told Aditya Birla – give the market rate, he readily agreed, so there was no conflict. Then they said we want one job for every home that are losing the land. They said no, these are not skilled people and we don t require these people. I said – those who have passed SSLC, I will work out three years technical course in my local Karnataka polytechnic and we worked out that. All of them are absorbed and the problem was solved.

If this kind of an approach can be made by every industry all the conflict that you find or sometimes the insurgency which arises out of it and naxalism which arises out of it can be dealt with. You need to gel with society. It applies to the government and equally applies to corporate bodies.

Q: People like Narayana Murthy and Nandan Nilenkani are following in the footsteps of other entrepreneur giants all over the world who are donating a large part of their fortune. Have you spoken to them about these provisions after you have taken over as the corporate affairs minister?

A: We are just about to send the bill to the cabinet. I am going to discuss with them at 6 pm today.  I am prepared to do that. I don t want to comment on Nandan Nilekani and Narayan Murthy. They are from my state. Everyone, including, Mr Narayan Murthy will have to revisit the approach that they are making on CSR. That is just not adequate.

Q: One of the demands rather from a certain section has been should India Inc also provide reservation in some sort of manner to the weaker section of society, to those that are recognized by government and law as people who need to be given some special dispensation of about jobs and employment. Can that ever happen?

A: In our party we have not firmed up that idea. That is one of the things which is being talked about as to whether we should provide reservation or we provide the same pattern as it is done in the US like affirmative action, so that diversity of the society is reflected, not only in government services but also in corporate services. These are some issues which we have still not affirmed. Moreover this has not formed place even in the new Companies  Bill.

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