The Ministry of Corporate Affairs has issued preliminary notices to nearly 300 companies for not complying with CSR spending requirement under the companies law for 2015-16, a senior government official said.
The Ministry of Corporate Affairs has issued preliminary notices to nearly 300 companies for not complying with corporate social responsibility (CSR) spending requirement under the companies law for 2015-16, a senior government official said.
The Companies Act mandates that firms with net worth of at least Rs 500 crore or revenue of Rs 1,000 crore or net profit of Rs 5 crore should spend at least 2% of the average net profits made during the three immediately preceding financial years on CSR.
“We have send them a notice and have asked to give a reason…We are just saying that these companies were supposed to spend this much and they have not spend. Apart from that, there are other legal formalities like forming a committee and developing a policy. These companies have not compiled with that as well,” the official said.
For 2014-15, prosecutions against 254 were sanctioned, of which 33 companies have filed applications for compounding, the official said.
Over the years, CSR spending by companies have come down. According to the data from the government, in 2016-17, Rs 4,719 crore was spent by 6,286 companies, compared with Rs 13,828 crore during 2015-16 by 19,184 firms. In 2014-15, around 15,000 companies had spent about Rs 9,500 crore on CSR activities.
Of 6,286 companies, as many as 2,203 firms spent more than the prescribed amount towards CSR during the April-November period of 2016-17, while 3,718 companies spent less than the required amount and 346 firms did not spend any amount towards such activities.
The ministry had in April this year established the Centralised Scrutiny and Prosecution Mechanism (CSPM) for the financial year 2015-16 onwards on a pilot basis for enforcement of CSR provisions. It also mandates that any failure in this regard should be explained in the annual financial statement. The disclosure requirement was meant to ensure firms do their best in CSR initiatives and hence no penalty for default of this requirement is prescribed in the law.
“Very soon, we may come out with some policy for companies so that they comply with the CSR norms,” the official said.
The government has already set up a 11-member panel, headed by corporate affairs secretary Injeti Srinivas, to review the existing framework and formulate the road map for a coherent policy on CSR activities under the companies law. The committee is expected to review the existing CSR framework as per Act, rules and circulars issued from time to time and recommend guidelines for better enforcement of CSR provisions.