The discourse on expanding the ambit of welfare in the era of second generation of economic reforms in India has achieved a pragmatic orientation with the enactment of the new Companies Act, 2013.
The Indian State took a great leap forward by bringing both the State and the market into the dynamics of ensuring welfare to the people at large.
Corporate Social Responsibility (CSR) in the section 135 of the Companies Act, 2013 has come into effect from 1st April, 2014, which makes mandatory provision for the companies to spend at least 2% of the net profit in every financial year. This would mean an approximate estimated $3.5 billion will flow into grassroots development and social enterprise sectors every year.
Out of 1.3 million companies in India, about 8,000 companies will come under this new policy as it is applicable only to companies that have a minimum net worth of Rs 500 crore, turnover of Rs 1,000 crore or net profit of Rs 5 crore. The question before corporates is to define their role in this tricky situation of deciding their contribution and association to make meaningful impact on areas of national importance, rather than take a short-term approach of distribution of goodies to poor people, as being adopted by many corporates.
In the second-half of the UPA-II, the increasing trust deficit syndrome between the government-corporate and civil societies in the country spoiled the prospects of many new projects and affected the much required growth of corporate sectors in the country. So, many believe that the new CSR provision will work as a bridge to foster a tripartite relationship between government-corporate-civil societies and provide an adequate space for corporates to engage with both elected government and civil societies, to address the issue on the risk mitigation, means of operation, reputation and moral obligation.
The much-awaited second generation economic reforms in India, which have been stiffly opposed by certain influential sections of civil societies, can possibly be neutralised if corporates come forward to extend their hands in the social development agenda in true spirit. The Indian State took a great leap forward by bringing both the State and the market into the dynamics of ensuring welfare to the people at large, through this historic step.
It is interesting to find that the considerable interest shown by corporates in India in taking forward this noble work through the window of corporate social responsibility, with a strong notion that business cannot succeed in a failed society and in place, where there has been non-equitable economic justice over the period of time.
After the successful and notable eradication of the Polio in public-private partnership mode, the corporate needs to explore areas of national importance and prepare themselves to be part of such great campaign and debate within themselves, whether intervention should be jointly taken up on health programmes like Tuberculosis (India has the world’s “highest burden” of tuberculosis and it takes the life of one person in every two minutes in the country or almost 750 people daily) or in education programme, where quality of education is a big question or any other poverty reduction program, where people below poverty line can be supported to come out from poverty.
Is there a need to develop a strong mechanism of support system by corporates for those workers, who have given their blood and sweat to make many industries grow in the country, or whether the corporate should put focus on areas where the government could not achieve much needed success? These are few among many unanswered questions.
The answers to these questions will make or break the CSR spirit in the country. However, the economic reform requires much-needed human face that may be ensured through the implementation of the CSR Act in letter and spirit and, at the same time, the innovative CSR initiatives will ensure simultaneous pursuit of economic growth and human development. (Author is a New Delhi-based policy analyst)
By Sachi Satapathy
This article was taken from here.