Corporate India Has Applied Only A Quarter Of The Estimated CSR Budget
A
full fiscal year has passed since the new Indian Companies Act 2013
came into force, mandating CSR for companies meeting certain criteria
of turnover, net worth and net profit. One still observes a lot of
excitement and hope, but the impact of mandating CSR in India is as
yet unknown.
full fiscal year has passed since the new Indian Companies Act 2013
came into force, mandating CSR for companies meeting certain criteria
of turnover, net worth and net profit. One still observes a lot of
excitement and hope, but the impact of mandating CSR in India is as
yet unknown.
In
the meantime the Ministry of Corporate Affairs (MCA) has constituted
a High Level Committee to suggest measures for improved monitoring of
the implementation of CSR policies by eligible companies coming under
Section 135 of the Act.
the meantime the Ministry of Corporate Affairs (MCA) has constituted
a High Level Committee to suggest measures for improved monitoring of
the implementation of CSR policies by eligible companies coming under
Section 135 of the Act.
MCA
has also come out with a short list of what it likes to call
‘sanitized’ NGOs – ‘free of any terrorist links or unwanted
funds’ – that companies may choose to partner with for
implementing their CSR policy.
has also come out with a short list of what it likes to call
‘sanitized’ NGOs – ‘free of any terrorist links or unwanted
funds’ – that companies may choose to partner with for
implementing their CSR policy.
MCA
is listing the ‘sanitized’ NGOs through the Indian Institute of
Corporate Affairs (IICA). NGOs for CSR purposes (CSR implementing
agencies) will be registered with the ‘Implementation Agencies Hub
for CSR’. It is hoped that this will synergize partnership between
corporations and NGOs and meet the requirement of companies looking
for NGO partners.
is listing the ‘sanitized’ NGOs through the Indian Institute of
Corporate Affairs (IICA). NGOs for CSR purposes (CSR implementing
agencies) will be registered with the ‘Implementation Agencies Hub
for CSR’. It is hoped that this will synergize partnership between
corporations and NGOs and meet the requirement of companies looking
for NGO partners.
The process for NGOs requires online registration
and submission of a number of notarized documents and payment of Rs
10,000/-. Only NGOs whose average turnover over the last three years
is at least one crore rupees will be eligible.
and submission of a number of notarized documents and payment of Rs
10,000/-. Only NGOs whose average turnover over the last three years
is at least one crore rupees will be eligible.
Companies
are likely to give greater weight to IICA listing than to NGO
evaluation by sector-focused initiatives like GiveIndia, GuideStar
India, HelpYourNGO and Samhita.
are likely to give greater weight to IICA listing than to NGO
evaluation by sector-focused initiatives like GiveIndia, GuideStar
India, HelpYourNGO and Samhita.
While
CSR has been made mandatory under law, NGOs that were expecting a
bumper crop of funds have not been able to harvest even a trickle.
The estimated Rs 20,000 crores has been scaled down to just Rs 5,000
crores. Why is that? Below are some possible reasons.
CSR has been made mandatory under law, NGOs that were expecting a
bumper crop of funds have not been able to harvest even a trickle.
The estimated Rs 20,000 crores has been scaled down to just Rs 5,000
crores. Why is that? Below are some possible reasons.
-
The
old private sector companies like Tata, Godrej, Mahindra and Birla
have anyway been involved in CSR for decades through their trusts
and foundations. -
Out
of the 16,000 companies hit by the mandatory CSR clause (Section 135
of the Indian Companies Act 2013), the vast majority have funds
between Rs 10 lakhs and Rs 50 lakhs only. Unless pooled effectively,
these funds get frittered away in a manner that is neither
appropriate nor impactful. -
The
bulk of funds lie with public sector undertakings (PSUs) and they
generally have semi-governmental systems, processes and paperwork
that many NGOs are not quite comfortable with. -
Several
NGOs, especially the smaller ones, are still looking for
‘donations’. They are unable to grasp the fact that companies
are mandated under law to implement CSR in programmes or project
mode only, with clear ‘needs statements’, ‘goals’,
‘objectives’, ‘outputs’ and ‘outcomes’. -
A
few companies are adopting the easier route of making corpus grants
to their own foundations or giving it to the Prime Minister’s
National Relief Fund.
One
thing that could make partnering with an NGO more attractive for
companies is the income tax situation. CSR expenditure is not
allowed as expenditure under Section 37 of the Income Tax Act 1961 –
although any CSR expenditure that is allowed as a deduction under
other sections is permissible. Hence, if a company were to undertake
CSR activities on its own, there would be no tax deduction. However,
by partnering with an NGO that has a tax deduction certificate, the
company could claim a deduction.
thing that could make partnering with an NGO more attractive for
companies is the income tax situation. CSR expenditure is not
allowed as expenditure under Section 37 of the Income Tax Act 1961 –
although any CSR expenditure that is allowed as a deduction under
other sections is permissible. Hence, if a company were to undertake
CSR activities on its own, there would be no tax deduction. However,
by partnering with an NGO that has a tax deduction certificate, the
company could claim a deduction.
Over
the next couple of months we will know how exactly ‘corporate
India’ has performed in the CSR space. In the meantime, companies
in India have not yet understood the real value or benefit that
accrues from being CSR compliant, with or without the law mandating
it. Also, unfortunately, neither Section 135 nor the CSR Rules have
accounted for ‘employee engagement’. In the West, employee
engagement is a major component of a company’s CSR policy.
the next couple of months we will know how exactly ‘corporate
India’ has performed in the CSR space. In the meantime, companies
in India have not yet understood the real value or benefit that
accrues from being CSR compliant, with or without the law mandating
it. Also, unfortunately, neither Section 135 nor the CSR Rules have
accounted for ‘employee engagement’. In the West, employee
engagement is a major component of a company’s CSR policy.
(from our CSR Trends column –
CAP’s quarterly newsmagazine ‘Philanthropy’ Q1 April – Jun 2015 )
CAP’s quarterly newsmagazine ‘Philanthropy’ Q1 April – Jun 2015 )