Corporate Social Responsibility (CSR): this reads like a contradiction in terms—and, where India Inc is concerned, probably is, for the most paTaxrt. India is perhaps the only country in the world that, driven by the need to show a certain illusory altruism of company profits, has legislated social expenditure by the private sector. The private sector often views the mandatory expense of 2% of the average net profit-before-tax of three years previous on a whole range of social do-gooding as an additional tax.
In FY17, 19,553 companies spent CSR monies of ₹14,344.87 crore on 22,968 projects. In FY18, 21,520 companies spent ₹17,098.18 crore on 26,582 projects. In FY19, 25,103 companies spent ₹20,172.07 crore on 31,989 projects. In FY20, 22,718 companies spent ₹24,891.63 crore on 35,006 projects. In FY21, 17,007 companies spent ₹24,865.46 crore on 36,865 projects.
These statistics are from the National CSR Portal of the Union Ministry of Corporate Affairs (MCA). However, they are at variance with that presented by Rao Inderjit Singh, Union minister of state for corporate affairs, in a written reply to a Lok Sabha question in November 2021, in which he averred that CSR expenditure in FY21 fell sharply by 64.24% year-on-year to ₹8,828.11 crore (by 1,619 companies) from ₹24,688.66 crore in FY20 (by 22,531 companies). It was ₹20,150.27 crore in FY19 (by 25,099 companies).
The right hand of data-collation in the government doesn’t quite know what the left hand is doing.
It is no wonder that, in March 2022, the Parliamentary Standing Committee on Finance, while asking the MCA for an audit of the top 10 private companies, sector by sector, noted that “information regarding CSR spending by companies is insufficient and difficult for a layperson to access”.
Here’s some more seemingly contradictory data. In FY21, the aggregate expenditure of Public Sector Undertakings (PSUs) on CSR was a paltry ₹561 crore (or 6%) of the total ₹8,828 crore, with the rest contributed by the private sector. But granular detail is telling: 67%—or ₹5,915 crore—was received from non-listed companies, while listed firms delivered the remaining third, ₹2,913 crore.
For obvious reasons, FY21 is receiving a fair share of attention, not merely seeking to explain the reasons for the precipitous drop in CSR spend but also to prognosticate if this slide can be beaten in the face of the continuous lowering of the growth rate by the RBI and international finance giants.
For example, in FY21, there were 2,926 companies with zero spend on CSR. Companies that spent less than 2% rose from 3,078 in FY16 to 3,290 in FY21. The number of companies participating in CSR declined.
In fact, public funds (from Central and state governments) account for about 93% of the total social sector expenditure.
CSR contributions are, therefore, literally a drop in the ocean of social need. Going by NITI Aayog, India must channel about 13% of its GDP into social expenditure to achieve its United Nations Sustainable Development Goals (UNSDG) commitments by 2030. This is 6% more than the current average of about 7%. Basically, everything must nearly double: CSR as well as government social expenditure. All else carrying on as usual, the deficit of ₹8 lakh crore in FY21 for accomplishing the 2030 UNSDG is expected to rise to ₹10 lakh crore in FY26.
The fact that the CSR architecture is predicated on disclosure, and that CSR-mandated companies alone are required to file their details of annual CSR spend with the MCA serves to make the waters even more turgid for those seeking clarity.
Often, CSR funds are routed to the concerns of the political party in power. For instance, in FY16, two years after CSR was made binding, only ₹46.5 crore was spent on conservation of national heritage. The very next year, it shot up to ₹155.78 crore—because five major PSUs contributed ₹146.83 crore to the prime minister’s personalised project, the Statue of Unity. So outré was this funding that the August 2018 report of the Comptroller and Auditor General of India noted: “Contribution towards this project did not qualify as CSR activity as per schedule VII of the Companies Act 2013 as it was not a heritage asset.”
Contributions to cow-related—as opposed to secular animal-related—activities peaked between FY15 and FY18. The Prime Minister’s Relief Fund is a perennial—if seesawing—attractor, while the Swachh Bharat Abhiyan, which was once the government’s buzz phrase, has fallen from CSR grace.
But the worst of the CSR spend is not that it is directed at buttering up power, but that so much of it is misdirected and mislocated. The vast majority of CSR monies are spent in the top 10 states.
Some of this is down to pure corporate comfort: companies spend where they have their offices and factories. And they tend to locate their offices and factories in the most-developed areas. Ashoka University’s Centre for Social Impact and Philanthropy noted that 54% of CSR companies are concentrated in Maharashtra, Tamil Nadu, Karnataka, and Gujarat. In FY19, the top 10 states, based on the number of companies with registered offices—and all on the top half of the development median—accounted for 96% of the total CSR spend.
The focusing of spending in these states means that states such as Jharkhand, Bihar, Chhattisgarh, Madhya Pradesh, and Uttar Pradesh, which account for more than 55% of the so-called “aspirational districts” (states with poor socioeconomic indicators), receive only a smidgen of the total CSR outgo.
Maharashtra, for instance, has only three aspirational districts. But, according to the government’s National CSR Portal, the state received a whopping ₹3,306.72 crore in FY21. In contrast, UP, with eight aspirational districts, received ₹826.67 crore. West Bengal, with one aspirational district, received ₹427.44 crore. And Bihar, with 15 aspirational districts, received just ₹78.02 crore.
While this might satisfy the aspirations of the corporates, none of it is just.
Kajal Basu
Veteran journalist