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Parliamentary Panel Picks Holes in CSR

Published: 05th December 2015 03:50 AM  |   Last Updated: 05th December 2015 03:50 AM   |  A+A-

NEW DELHI: Though the Companies Act which mandates two percent compulsory corporate social responsibility (CSR) spending by the companies has been in force for over a year, yet the central public sector companies have not utilised over 50 percent of their funds.

The Act may have notable features in carrying out community welfare activities, but suffers from several lacunae which hinders its effective monitoring, a parliamentary panel observed.

The BJP’s Rajya Sabha MP Shanta Kumar-led Committee on Public Undertakings, which presented its report on Friday, suggested several means to improve the working of the CSR scheme as it involves huge money which can be used for public good.

The Companies Act, 2013, makes it legally binding on companies crossing a threshold limit  - with net worth of Rs.500 crore or more; or turnover of Rs.1000 crore or more; or net profit of Rs.5 crore or more - to spend at least two per cent of their average net profit made during three immediately preceding financial years, on CSR activities every year.

By virtue of this provisions, 131 Central Public Sector Enterprises  together  have Rs 3683.73 crore as CSR funds.  However, with regard to private Companies,  there are a total of 952892 private companies with authorised capital of Rs.1,476,339.28 crore. There are 21,429 companies having net profit of above Rs.5 crore  which makes them eligible for CSR funding.

“The analysis of the data furnished by 13 CPSUs, as examined by the committee, indicates that these 13 CPSUs allocated Rs. 2139.75 crore during the year 2014-15 under CSR which included carry forward amount of unspent amount of previous years, out of which Rs.1020.44 crore was spent thereby leaving Rs.1119.31 crore as unspent amount,” the panel noted.

The panel pointed out an anomaly in the act saying  that under the Act a company can only be penalised for not filing of details regarding CSR, but no penal action for no-performance.   “Company can easily get away with filing of requisite details without properly spending on CSR.  The Committee finds this inadequate to meet the objective of mandatory expenditure under CSR as per the new statutory provisions and strongly recommend for making non-compliance of spending of prescribed allocations on the admissible activities in the prescribed manner a punishable offence and for making suitable provisions in this regard,” Shanta Kumar said.  The parliamentary committee also found out that 13 CPSUs examined by it spent CSR allocations on ineligible activities. “The Committee expresses strong concern over the way CSR outlay is spent by some of the CPSUs, which apparently does not qualify as CSR. The Committee strongly recommend that such violation of rules should be taken up with the concerned administrative Ministry and CPSUs and panel apprised about the action taken in this regard.

Redefine The Term CSR: Panel

The committee also recommended redefining the term “CSR”. “CSR should be clearly defined in the Act itself after incorporating the broader principles of CSR ,ie, serving the interest of the most marginalised sections of the society in line with teachings of the father of the nation Mahatma Gandhi



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