Coming soon, stricter CSR spend norms for PSUs

Written by Noor Mohammad | Noor Mohammad | Ashish Sinha | New Delhi | Updated: Aug 28 2013, 14:39pm hrs
With the passing of Companies Bill, 2013, the government is set to make stringent norms for Central Public Sector Enterprises (CPSEs) to implement the corporate social responsibility (CSR) projects. The corporate affairs ministry is working out the modalities with the department of public enterprises as for several years the profit-making maharatna and navratna CPSEs have not been fully utilising the CSR corpus.

Sources said the government is also exploring options of levying financial penalty on those profit-making CPSEs which do not utilise their CSR corpus continuously for two or three years. Also, if the CSR funds remain under utilised, the leftover amount will go to a central corpus fund which will be used at the discretion of an apex board on CSR which may be constituted soon.

"If the private sector companies are being mandated to spend on CSR and report reasons why they could not spend, the public sector companies should also be up to the mark. I will study the spending patterns of PSUs and see what more can be done," corporate affairs minister Sachin Pilot told FE.

As part of the multi-step strategy, first the top earning CPSEs like Coal India (CIL), Indian Oil Corporation (IOC), ONGC and SAIL, among others, will have to mandatorily spend a minimum of 2% of their average net profit on CSR. So far, the CPSEs generating profit in excess of R500 crore were authorised to spend a minimum of 0.5% of profits on CSR.

This was revised upwardly to 1% in December last year. Now, it will be revised again to 2% to align with Clause 135 on CSR outlined in the new Companies Bill, 2013, which will soon be called Companies Act of 2013.

CPSEs, whose net profit is less than R100 crore, will also need to spend a minimum of 2% on CSR as opposed to 3-5% before. Confirming this, OP Rawat, secretary, department of public enterprise, said: "When the Bill is enacted, the minimum spend for all PSUs will also need to be 2% for sure."

Under utilisation of CSR funds by the CPSEs is not a new thing. During 2011-12, CIL earmarked R553 crore but spent merely R77 crore while ONGC allocated R378 crore and utilised only R121 crore, the figures tabled in Parliament said. IOC allocated about R 96 crore and used only R83 crore and SAIL allocation was R64 crore and utilised amount was R61 crore, for carrying out CSR activities for FY 12. As regard to 16 Navratna PSUs, four of them BHEL, GAIL, Hindustan Petroleum and RINL also did not fully utilise the allocated amount for CSR, the figures showed.

However, CPSEs like private sector companies will be allowed to fund trusts, societies, NGOs and pool resources with other companies to undertake the CSR activities, subject to riders. All funding of such trusts and NGOs will need the mandatory approval of the CSR Board to be constituted by every company that is qualified for CSR activities, sources said.

Under the proposed rules, which are currently being fine-tuned by the MCA, promotion of sports, welfare measures for differently-abled persons, and adoption of villages may also qualify as genuine CSR activities under the new Bill.

"Already a number of PUSs have been doing good CSR work and the new provisions will only strengthen them while encouraging others to do more," said a senior government official.

Take for example the CSR work on rain water harvesting project Boond being executed by Bharat Petroleum Corporation in association with the Oil Industries Development Board that selects draught-stricken villages to turn them from "water-scarce" to "water-positive".

Hindalco Industries has concentrated its CSR activities in 692 villages and 12 urban slums, where it reaches out to about 26 lakh people.

It has constructed check dams, ponds and bore wells to provide safe drinking water. Indian Oil Corporation runs the Indian Oil Foundation,which works for the preservation of heritage.