Allowing top companies to fund incubators through the corporate social responsibility (CSR) obligation can help in promoting the startup ecosystem in a big way.
Given the mandatory CSR spending of 2% of the net profit by the India Inc in its current form reflects more of a shadow tax for the governance deficit in the social sector than a serious contribution to fulfill any meaningful social obligations, it is good that the government is now looking at innovative ways for attuning it to the emerging needs of the new age economy.
According to a Times of India report, the department of industrial policy and promotion has asked the top 50 companies in the country to fund incubators as part of their CSR spend for strengthening the startup ecosystem.
The basic idea is to channelize CSR money of the top companies to either fund the existing incubators working in the government institutions or setting up of the new ones and create linkages for them – while the government has planned to set up 35 incubators in the government institutions with the help of the states, an equal number is to be set up with private sector and the Centre sharing equal burden of funding.
Clearly, if this plan to embed the startup domain with the CSR work of top companies gets going, this process will get a much-required boost without much of an effort from the government side and can become a win-win proposition for both.
Government analysis of the CSR spending of 460 listed companies in FY15– 409 in the private sector and 51 in the public sector – shows a total spend of Rs 6337 crore. Of which, the contribution of top 20 was 3,542 crore.
While Reliance Industries Limited topped the list with Rs 760.58 crore, ONGC at number two position had spent 495.23 crore in the year, Infosys was at number three with Rs 239.54 crore followed by Tata Consultancy Services (Rs 219 crore), ITC (Rs 214.06 crore), NTPC (Rs 205.18 crore), NMDC (Rs 188.65 crore), Tata Steel (Rs 171.46 crore), OIL (Rs 133.31 crore), WIPRO (Rs 132.70 crore), IOC (Rs 113.79 crore), BHEL (Rs 102.06 crore), and rest below Rs 100 crore with HZL at the 20th spot (Rs 59.28 crore).
A look at the areas and funding, which they got from the total CSR spending in FY15, in itself, indicates why supporting incubators may be a more fruitful way to capitalize on this window.
Eradicating hunger, poverty and health care got the maximum Rs 1422 crore, educational/vocational skills/livelihood enhancement cornered s 1463 crore and Rs 1189 crore was spent on environmental sustainability. Rural development (Rs 724 crore), art and culture (Rs 539 crore) and sports promotion (Rs 455 crore) were the other major areas of spending.
As these are mostly areas where the government spending should be the driver and not the CSR, it goes without saying that getting the top 50 companies to focus on incubators through the CSR route is a much better option, and is the way to go.