The ministry of corporate affairs (MCA) is planning to introduce identification numbers for agencies that implement corporate social responsibility (CSR) programmes on behalf of various companies, in a bid to better monitor the work the firms claim to be doing.
As part of the planned move, the implementing agencies will have to get registered with the MCA and details of their CSR work on behalf of each company and the progress in each project will have to be uploaded online with regular updates so that even the public can see these, a senior government official told FE.
Already, the MCA has been issuing identification numbers to directors of companies. The government on Monday launched a data bank of independent directors, which will be a ‘comprehensive repository’ of existing directors as well as those eligible for such a role. The proposed move on implementing agencies may help create a similar repository on CSR activities.
“We don’t want to micro-manage or regulate, the public will view the details and themselves judge if the CSR claims are true or not. We just want to make it a very transparent system,” said the official. According to the extant rules, companies with a minimum net worth of Rs 500 crore, turnover of Rs 1,000 crore, or net profit of Rs 5 crore are mandated to spend every year at least 2% of their average profit for the previous three years on CSR activities.
Earlier this year, following concerns expressed by India Inc against an up to three-year jail-term provision proposed in the amendments to the Companies Act for non-compliance of the CSR norms, the corporate affairs ministry had made it only a civil offence with penalty.
The move to increase scrutiny of CSR implementing agencies comes amid claims that companies are spending thousands of crores on CSR programmes. Since tax incentives can be claimed by companies against these activities, a better monitoring of the programmes has been necessitated.
India Inc’s spending on CSR has been falling in recent years, probably mirroring diminishing corporate profits, but they still account for a sizeable chunk of funds. The total CSR expenditure stood at Rs 13,624 crore in FY18, against Rs 14,330 crore a year before, according to the latest data available with the national CSR portal, overseen by the MCA.
Maharashtra tops the list with CSR spending of Rs 2,527 crore in FY18, followed by Karnataka (Rs 951 crore), Gujarat (Rs 769 crore), Tamil Nadu (Rs 619 crore) and Delhi (Rs 541 crore). Education and programmes for the differently-abled drew the maximum amount of CSR funds in FY18, followed by health, eradication of hunger, poverty and malnutrition (Rs 3,301 crore), rural development (Rs 1,477 crore) and environment (Rs 1,361 crore).
Laws governing CSR come under the Companies Act, 2013, and were put into effect from April 1, 2014. Listed companies are required to disclose their CSR activities, amount spent and framework created for compliance of the norms to the MCA on a regular basis.