New Delhi: As their profit margin improves in tune with higher growth in economy, the corporate sector has become more responsible by increasing their CSR spending.
CSR spending by public sector and private sector entities has grown by 44.57 per cent between FY15 and FY16 and continues to grow. As per data collected by the ministry of corporate affairs, the total CSR spending by companies registered with it increased to Rs 13,827.86 crore in FY16 from Rs 9,564.77 crore in FY 15, the first year after the introduction of new rules on corporate social responsibility (CSR).
The CSR rules, implemented in April 2014 under Section 135 of the Companies Act, direct that companies with a networth of Rs 500 crore, a revenue of Rs 1,000 crore or a net profit of Rs 5 crore spend 2 per cent of their average profit on social development activities such as education, health and women’s empowerment. The money can be spent by setting up a CSR department within the company or by partnering with not-for-profit organisations.
The government data suggests that CSR spending increase has continued in FY17 with corporate sector expenditure reaching Rs 4,719 crore in the first eight months of the year. With large chunk of spending coming in the last quarter, sources said, FY17 numbers would be as big as previous year and a tad higher too.
“We find that following the implementation of CSR rules, there has been an increase in the number of firms that are spending on these social initiatives as well as the total amount spent on CSR activities. However, the distribution of CSR expenditures amongst firms continues to be unequal, an area that needs to be looked at by policy makers,” said a corporate sector analyst who did not wish to be named.
If one looks at MCA data, public sector undertakings take the lead in terms of growth seen in their CSR spends over the years In fact, between FY15 and FY16, PSUs increased their CSR spend by over 56 per cent. During the same period, the private sector firms have had higher share of contribution but their spend has increased by about 40 per cent.
But even as annual CSR spend is on the rise, the impact on the ground and effective deployment of the funds remain a matter of debate. The government data suggests that a large portion of CSR money has flown into various government programmes, including under the ‘Sansaad Adarsh Gram Yojana’ that are more politically driven with little concern towards societal uplift.
The data suggests that between FY15, FY16 and FY17 (April-November period), contribution made towards rural development projects qualified for CSR spending stood at Rs 1,031.02 crore, Rs 1327.57 crore and Rs 628.56 crore respectively.
Among the activities getting maximum CSR spending are health, education and rural development projects. Surprisingly, the NDA government’s Swachh Bharat Kosh still gets low corporate funds (to the tune of RS 300 crore annually), though in per centage terms the money has increased in last three years. Corporates are also spending paltry sum (mere Rs 30 crore annually) towards clean Ganga project.
“Even though we are seeing a steady increase in the amount of money being allocated by firms under CSR, there appears to be a disconnect in what the requirements on the ground are and what the companies are allocating money towards,” said a official associated with NGO handling several CSR projects for companies.
As is evident from the MCA data, companies often choose certain causes over others, not always based on the needs on the ground. It is mostly politically driven, with the need to be in the right books rather than bringing about tangible benefits to society.