Corporate affairs minister proposes SPV for transparent & full use of funds
An independent mechanism may be put in place to ensure fair, transparent and full use of the funds earmarked by India Inc for corporate social responsibility (CSR) activities. New corporate affairs minister Sachin Pilot has proposed creation of an entity — likely a special purpose vehicle (SPV) — for monitoring CSR funds use besides ensuring that corporates don’t fail in timely execution of CSR projects. Speaking to FE, the minister said the proposed body would be independent of government intervention and run by corporates/industry bodies, with a wide representation to ensure its neutrality. Pilot has invited industry bodies like the Confederation of Indian Industry, Federation of Indian Chambers of Commerce and Industry and top corporate executives to discuss the matter on December 4.
The Companies Bill, 2011, slated for consideration and passing by Parliament in the current session, makes it mandatory for profitable government and private companies to allocate 2% of their average profits accrued in the preceding three financial years on CSR programmes. According to estimates, the annual CSR funds corpus could be around R10,000 crore (around $2 billion) or more.
As per the ministry’ plan, there would also be a national-level CSR body to monitor the activities of the proposed SPV/financial entity. Its mandate will be to ensure that the funds earmarked for CSR projects are fully used up on the designated activities.
Sources said the proposed SPV/financial entity would have legal status and won’t aim to make profits. It will need to maintain record books and financial statements and will have to furnish audited financial statements to the Registrar of Companies. Among others, there is also a proposal to allow the corporate sector to work with a corporate partner or a non-governmental organisation to execute their CSR initiatives with the approval of the national-level CSR body.
Pilot clarified that the government has no intention of controlling the proposed SPV or the financial entity. “The idea is to keep the CSR funds outside of the government’s intervention. Right now, it is a proposal and we are meeting companies and various industry bodies for their feedback and suggestions. The idea is to ensure that the funds are spent on substantial CSR activities,” Pilot said.
Stating that his first priority was to get the Companies Bill passed by Parliament, the minister said: "We can always make amendments in the law once it is