Corporate social responsibility: Spend up, still short of target

Unspent amount at Rs 1,984 cr; Contribution to PM’s relief fund and other Central/state funds jumps 418 per cent.

Written by Sandeep Singh | New Delhi | Updated: October 26, 2016 12:02 pm
corporate social responsibility, csr, corporate social responsibility news, companies act, average net profit, corporate social responsibility, business news India Inc spent Rs 8,345 crore as part of their CSR obligation in 2015-16, a 28 per cent jump over the Rs 6,526 crore spent in the previous year.(Illustration: C R Sasikumar)

Mandated by regulation to spend at least 2 per cent of the average net profit (earned over the last three years) towards various social causes, India Inc spent Rs 8,345 crore as part of their CSR obligation in 2015-16, a 28 per cent jump over the Rs 6,526 crore spent in the previous year.

While education and healthcare continued to top the list of categories where the companies spent the most, the Prime Minister’s National Relief Fund along with other funds set up by the Central and the state governments has been the biggest gainer as it witnessed a jump of 418 per cent in contribution from India Inc from Rs 167 crore in 2014-15 to Rs 868.7 crore in 2015-16.

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While the compliance has risen over the previous year, a closer look at the data released by Prime Database (covering 920 companies which fall under CSR provisions and have provided details) reveals that the unspent amount for the year stood high at Rs 1,984 crore, indicating that a large number of companies failed to meet their social obligation and did not spend the prescribed amount on CSR.

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While Reliance Industries, NTPC and ONGC accounted for the largest CSR spends during the year, the biggest companies that failed to spend the mandated 2 per cent were ONGC, Bharti Airtel and HCL Technologies. Others that missed out on spending the prescribed amount were HDFC Bank, Hindustan Zinc, TCS, Cairn India and Infosys. In fact, some of the companies in the list like ONGC, TCS and Bharti Airtel failed to meet norms even in 2014-15 and therefore have failed to meet the compliance during both the years.

The unspent amount has, however, come down over the previous year. Against an unspent amount of Rs 2,583 crore in 2014-15, the group of companies spent Rs 1,984 crore less than what was mandated in 2015-16. CSR expenditure by PSUs witnessed a sharp rise in 2015-16. On an overall basis while 48 PSUs spent Rs 2,078 crore in 2014-15, it went up by 41 per cent to Rs 2,936 crore by 47 PSUs in 2015-16.

Where the money was spent

While factors such as lack of being able to identify the right opportunity or project and not being able to find an implementing agency has been cited by companies as reasons for the unspent amount, a number of companies went for passive CSR spending and transferred the money to the Prime Minister’s National Relief Fund or other such funds set up by the central government or the state governments for socio economic development.

The Companies Act has prescribed nine different schedules under Schedule VII, under which spends can be made and it includes the PM’s relief fund. Government-owned companies lead from the front when it comes to passive CSR spends as almost 70 per cent of the money transferred to the relief funds has been done by PSUs. While NTPC has transferred Rs 278 crore or 56 per cent of its total CSR spend of Rs 491.8 crore into the relief funds, Power Finance Corporation and NHPC transferred Rs 173 crore and Rs 59.5 crore, respectively.

Among the private players, L&T tops with a transfer of Rs 60 crore into relief funds, followed by ITC and TCS which transferred Rs 38 crore and Rs 33.8 crore, respectively.

“A lot of companies find it better to do the CSR in a passive way as in that case they do not have to establish a team and are not required to identify and manage a CSR project but just write a cheque. Also, if someone genuinely wants to do CSR, then it is a very efficient way to do so,” said Pranav Haldea, MD, Prime Database.

While in 2014-15, the relief funds saw 3 per cent of the total CSR spent coming to them, its share jumped sharply to 10 per cent in 2015-16. The biggest areas of CSR spending continued to be education and healthcare. While Rs 2,042 crore or 24 per cent of the total CSR spend went into promotion of education, spending on combating diseases such as AIDS, malaria and other diseases accounted for Rs 1,637 crore or 20 per cent of the total CSR spend by companies. Money transferred to PM’s relief fund or other funds of Central and state government’s accounted for a total of Rs 868 crore and occupied the third spot.

A huge sum of Rs 1,782 crore (or 21 per cent of the overall spend) was made under ‘Other Matters’. However, areas such as child mortality, improving maternal health, promotion of gender equality and social business projects saw negligible spends.

Spending on child mortality and maternal health witnessed the maximum decrease of 22 per cent as it came down from Rs 37.4 crore to Rs 29.3 crore. Spending on environmental sustainability also came down from Rs 678 crore in 2014-15 to Rs 540.8 crore in 2015-16.

The expenditure also varies sharply across geographies. While Andhra Pradesh and Telangana saw total spends of Rs 629.7 crore in 2015-16, Maharashtra witnessed CSR spend worth Rs 529 crore during the year. Gujarat, Rajasthan and Tamil Nadu occupy the third, fourth and fifth spot. The growth in spending also seems to be in proportion to the size of the states as smaller states and Union territories have witnessed a decline in CSR spend during the period under review.

The CSR spend by companies in J&K came down by 63 per cent from Rs 183 crore in 2014-15 to Rs 119 crore in 2015-16. Arunachal Pradesh, Chandigarh, Andaman & Nicobar, Mizoram and Nagaland, among others, too saw a decline in CSR spend.