Though the companies act which mandates two percent compulsory corporate social responsibility 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 feature in carrying out community welfare activities, but suffers from several lacunae which hinders its effective monitoring, a parliamentary panel observed.
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.
According to 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 atleast 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 total 952892 private Companies with authorized 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 anomoly 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 find 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. For instance, SJVN Limited has made CSR allocations for support to Municipal Corporation Shimla for Beautification of Shimla and publication of reports of journals. IOCL has allocated some outlay under CSR for Nomination fee for CSR for Think Media Inc.; Consultation and estimate preparation at schools, Balasore, Odisha; Stakeholder meeting at Tinsukia, Assam; Purchase of Green Board, Office Furniture, Utensils . Its subsidiary CPCL had incurred CSR expenditure on salary to PTA teachers of Government Higher Secondary School in Tiruvallur, Tamil Nadu.
RVNL has allocated CSR outlay for Training of RVNL officials in Sustainability and Conducting promotional activities with executing contractors at work sites, which in Committee’s opinion do not come under
“The Committee express 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 the Committee apprised about the action taken in this regard.
The committee also recommended redefining the term “CSR”.
“CSR should be clearly defined in the Act itself after incorporating the broader principles of CSR i.e. serving the interest of the most marginalized sections of the society in line with great words of the father of the nation Mahatma Gandhi, who believed that development is ‘Sarvodaya’ through ‘Antyodaya’ implying the welfare of all by serving the last man in the queue, the poorest of the poor,” the recommendation said.
This article was taken from here.