Indian companies spent only 57% of what they were expected by law to spend as their Corporate Social Responsibility (CSR). As per their latest filings (as on March 31, 2019) with the Ministry of Corporate Affairs (MCA), the companies were expected to spend Rs 23,247 crore during the financial year 2017-18 going by their profits, but they spent just Rs 13,326 crore during this period.
This comes at the time when the government has brought in an amendment in the Companies Act, 2013, providing for a three-year jail term for violating CSR norms. The government, however, is reconsidering its decision and may review the provision to make it a civil offence. The high level committee on CSR headed by MCA secretary Injeti Srinivas has recommended that non-compliance of CSR norms be made a civil offence. The report was submitted to finance minister Nirmala Sitharaman on Tuesday.
As per the report, the companies spent 72% of the funds they were mandated to spend on CSR activities in 2016-17 and 85% of the prescribed amount in 2015-16. The CSR funds to the tune of Rs 10,000 crore remained unspent during 2017-18 as compared to Rs 5,477 crore in 2016-17 and Rs 2,500 crore in 2015-16.
UNSPENT CSR AMOUNT
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- Rs 10,000 cr – 2017-18
- Rs 5,477 cr – 2016-17
- Rs 2,500 cr – 2015-16
- 67% – of the eligible 19,532 firms spent on CSR during 2016-17
- 71% – of the 18,290 companies spent it during 2015-16
- Rs 10,787 cr – CSR spend by private companies in 2017-18
- Rs 2,539 cr – by PSUs during 2017-18
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The CSR provisions under Section 135 of the Companies Act, 2013, mandate that the companies with a net worth of Rs 500 crore or more, or turnover of Rs 1,000 crore or more, or a net profit of Rs 5 crore or more have to spend atleast 2% of their average net profits earned during three immediately preceding years.
A total of 21,337 companies were required to spend 2% of their profits on CSR activities during 2017-18, but only 54% of them fulfilled their obligation. In 2016-17, 67% of the companies out of a total of 19,532 mandated to spend on the CSR did so as compared to 71% of the 18,290 companies during 2015-16.
The reasons given by the companies for non-compliance of prescribed CSR amount range from delay in the implementation of plan, adoption of long gestation CSR projects to inability of companies to formulate a well conceived CSR policy and lack of prior expertise.
As many as 11,584 companies spent a total of Rs 13,326 crore on CSR in 2017-18. In contrast, 13,182 companies spent Rs 14,312 crore in 2016-17 and 12,955 companies Rs 14,503 crore in 2015-16.
The CSR spending by 11,314 private companies was at Rs 10,787 crore as compared to Rs 2,539 crore by 270 public sector companies (PSUs) during 2017-18. The spending was mostly higher by both the private and PSUs in the previous years. Private companies spent Rs 11,026 crore and Rs 10,302 crore in 2016-17 and 2015-16, respectively. In contrast, the PSUs spent Rs 3,285 crore and Rs 4,201 crore in the two previous years. This involved 12,810 and 12,551 private companies, and 372 and 404 PSUs during 2016-17 and 2015-16, respectively.
Among the activities for which the CSR funds were used, a maximum 37% was spent towards education, differently-abled and livelihood, followed by 29% on hunger, poverty and malnutrition, safe drinking water and sanitation during 2014-2018. During the same period, a total of Rs 2,939 crore was contributed towards the funds set up by the government, including Clean Ganga, Swachch Bharat Kosh and Prime Minister Relief Fund.
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