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    Default Sachin Pilot urges companies to see CSR as investment, not a burden

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    Corporate Affairs Minister Sachin Pilot

    Expecting an annual corporate social responsibility (CSR) spending of Rs 15,000-20,000 crore by India Inc, Corporate Affairs Minister Sachin Pilot has asked companies to see the new law as an investment opportunity to create a better work environment, rather than a forced expenditure.

    Under the new Companies Act, 2013, which has replaced nearly six-decade old legislation governing the way corporates function and are regulated in India, all profitable companies with a sizeable business would have to spend every year at least 2 per cent of three-year average profit on CSR works.

    This would apply to the companies with turnover of Rs 1,000 crore and more, or networth of Rs 500 crore and more, or a net profit of Rs 5 crore and more.

    Pilot said the government has left the canvas wide open for the companies to decide on their own about CSR activities they wish to undertake to comply with the new norms.

    He said the few areas prescribed under the law are only suggestive in nature and it should not be seen as a restrictive list.

    The new rules, which would be applicable from 2014-15, also requires the companies to set up a CSR committee of their board members, including at least one independent director.

    "This money would not come to the government of India. It is the companies' money and they can spend as per the decision taken by the CSR committee of their board. But they must report the same," Pilot said. "Our assessment is that if every company that is qualified for doing the CSR does so, then Rs 15,000-20,000 crore would be spent in a year in various projects such as environment, skill development, water, sanitation etc. We have left the canvas very wide as we thought it would not be proper to make it restrictive."

    The companies have been asked to give preference to their local area of operations for such CSR activities while those not being able to spend the required amount would need to specify the reasons for the same in their annual CSR report.

    According to the draft rules, which would be finalised after taking into account the suggestions from all stakeholders and the general public, CSR should not be seen as "charity or mere donations".

    It has been proposed that the CSR activities should not be exclusively for the benefit of employees of the company or their family members, while only those CSR activities would be taken into consideration that are undertaken within India.

    The companies would need to create a CSR corpus comprising of 2 per cent of net profit while any income from this corpus and the surplus arising out of CSR activities would need to be credited back to CSR corpus.

    According to industry estimates, the mandatory CSR rules would apply to close to 9,000-10,000 companies.

 

 

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