Indian Corporations tend to focus on CSR activities in the areas where they have operations as it earns them the goodwill of the local community.
NEW DELHI : Small and far-flung states get a measly amount of corporate social responsibility (CSR) funds spent by companies, while large state economies benefit mostly from it. According to official data on CSR spending for FY21, over 80% of the funds for which state-wise break up of spending is available, has gone to ten states.
The top ten beneficiary states include eight of the largest state economies by their FY20 gross state domestic product (GSDP):
- Andhra Pradesh,
- Uttar Pradesh,
- Tamil Nadu,
- Rajasthan and
- Madhya Pradesh.
The other two, Odisha and Haryana come in the top 15 state economies. Tripura, Mizoram, Lakshadweep, Andaman & Nicobar, Dadra and Nagar Haveli and Daman and Diu received either no or less than ₹1 crore of CSR funds. Some of the North-Eastern states such as Meghalaya, Manipur and Nagaland too got small amounts, according to data available from the ministry of corporate affairs.
The ten largest beneficiary states together received ₹4,135.5 crores in FY21, the lion’s share of the ₹5,004 crore CSR spending by companies for which state-wise data is available.
Companies have also spent on national projects but their state-wise fund allocation is not available. Including this, companies spent a total of ₹8,828 crores in FY21 on CSR, roughly a third of what they had spent in the pre-pandemic year of FY20 at ₹24,689 crores. Corporate charity took a beating in FY21 as net profits shrank.
In FY21, out of the total 14 eligible CSR fund uses, the maximum went to two categories– education, differently-abled, and livelihood followed by health care. These two sectors accounted for two-thirds of all the CSR spending in FY21.
Among top spenders, Reliance Industries Ltd. spent ₹922 crores, Tata Consultancy Services Ltd. spent Rs. 674 and Infosys Ltd. spent ₹361.82 crores.
Of the 1,619 companies that spent on over 8,000 welfare projects, 894 companies spent more than what they are mandated to spend in FY21 as the government in January gave the flexibility to spend more in a given year and to adjust the credits for it in the subsequent three years.
However, 353 companies spent less than the mandated amount while 178 companies did not spend anything at all although a penalty provision is effective from January 2021. Defaulting companies can no longer explain away why they did not spend 2% of net profits on CSR and are liable to a penalty of at least ₹1 crore, while each defaulting officer is liable to at least ₹2 lakh in penalty.
Large CSR spenders must carry out an independent impact assessment of their activities too. In FY21, 194 companies spent exactly as prescribed.
Companies with a net worth of ₹500 crore or more, or a turnover of ₹1,000 crore or more, or net profit of ₹5 crore or more, are required to spend 2% of their average net profit of the preceding three years on CSR activities. Defaults are treated as a civil wrong.
Corporations tend to focus on CSR activities in the areas where they have operations as it earns them the goodwill of the local community, while their employees, many of whom may also be hailing from that region, benefit from the welfare measures done to the local community. The support of the local community is crucial for many companies in running their facilities without any glitch. (Mint)