Spending on profit earning ventures cannot be CSR, says Pilot

However, spending on profit-making ventures for meeting CSR requirements is a "grey area", Pilot said.

Last Updated: Aug 14, 2013, 14:45 PM IST

New Delhi: As India Inc readies itself for mandatory social welfare spending, Corporate Affairs Minister Sachin Pilot on Wednesday said money spent on activities that earn profits will be a grey area while considering it as a CSR initiative.

The rules on what activities should qualify as such a CSR (Corporate Social Responsibility) initiative would be finalised after taking into account suggestions from an independent panel and other stakeholders.

However, spending on profit-making ventures for meeting CSR requirements is a "grey area", Pilot said.

The Minister was participating in nearly an hour long interaction with various people on 'Google Hangout' -- a multi-person online video chat facility -- today.

His comments came during a chat with leading industrialist Anand Mahindra who sought to know how any activity that brings in commercial profit would not fall into CSR category. He is the chairman of diversified M&M group.

"I think it is too early to do hair splitting on each and every nuance of how CSR will play out. We will learn as we go on. We have just made the structure and it has not come overnight," Pilot said.

According to Mahindra, one of the biggest challenges is how to include the concept of shared value that businesses are creating where profit is also included.

In response, Pilot stressed that even the perception of trust deficit with regard to CSR should be mitigated since it is about companies' spending their hard earned money.

"Like there are good politicians and bad politicians, there are good companies and not so good companies. Let companies use money for CSR and then they make profits out of it, whatever sense it is, then we come into a very grey area.

"How do we delineate ones that are doing business and really not contributing to (CSR)... I am not actually sure about how we take up certain projects," Pilot opined.

As per the new Companies Bill, approved by Parliament on August 8, certain class of companies have to spend two percent of three-year average annual profit for CSR activities.

The norms would be applicable for companies having either net worth of Rs 500 crore or more; turnover of Rs 1,000 crore or more; or net profit of Rs 5 crore or more.

Participating in the interactive session, Bharti Enterprises Vice Chairman & MD Rakesh Bharti Mittal said that CSR concept would formalise some of the work that corporate India is already doing.

Meanwhile, the Minister assured that there would be no "Inspector Raj" for implementing CSR activities by companies.