New Delhi: Top earning Central Public Sector Enterprises will have to double their minimum expenditure on corporate social responsibility (CSR) from beginning of 2013-14 fiscal, as per the new norms of the Department of Public Enterprises.
"CPSEs earning net profit of over Rs 500 crore will have to raise their minimum expenditure on CSR to 1 percent from the next fiscal from existing 0.5 percent," Department of Public Enterprises (DPE) Secretary O P Rawat said.
Under the new norms, PSUs with net profit of over Rs 500 crore in the previous year will have to earmark 1 percent of it from the current level of 0.5 percent for carrying out such activities. But the upper limit of 2 percent remains unchanged.
As per existing norms, CPSEs whose net profit is Rs 500 crore and above in the previous year, its CSR spending ranges between 0.5 to 2 percent of their profits.
However, the new guidelines related to allocation of budget for CSR will be enforced till the time new companies law comes into effect and once it is implemented the quantum of earmarking funds for CSR would change for all companies, including PSUs.
"The suggested slabs of budgetary allocation for CSR would stand modified as and when the new company law brings in provisions in this regard, which will need to be followed by all companies including the CPSEs," the revised norms stated.
Under the present system, there is also a provision of a minimum expenditure of Rs 3 crore on CSR activities for CPSEs, having a net profit of Rs 100-500 crore.
"Under the revised norms, the minimum requirement of Rs 3 crore has been removed as this created anomalous situation vis-a-vis CPSEs in the higher slab of over Rs 500 crore net profit," Rawat said.
Besides, CSR and sustainable development would be combined into one set of guidelines.
At present, CSR and sustainable development are two separate subjects and are dealt differently for the purpose of Memorandum of Understanding (MoU) evaluation.
Once the revised guidelines would be in place, the emphasis of CSR and sustainability would be on capacity building, inclusive socio-economic growth, environment protection, green and energy efficient technologies promotion, backward regions development and upliftment of under- privileged people.
"We have moved from financial CSR to all encompassing business conduct guidelines," Rawat said.
However, the percentage of earmarking funds remains the same for PSUs having net profit less of than Rs 100 crore.
These companies are required to earmark 3 percent of their income for undertaking such activities.
To address the issue of PSUs not fully spending the allocated funds earmarked for CSR, the government has made it mandatory for these companies to disclose the reasons for the same.
As per the new norms, the unspent amount of the budget allocated for CSR and sustainability activities for a year will have to be spent within the next two financial years, failing which, it would be transfered to a "Sustainability Fund" to be created separately for CSR and sustainability activities.
Besides, the revised norms underscore the need for the top management of PSUs to be actively involved in carrying forward the agenda of CSR and sustainability.
These guidelines give emphasis on scalability of projects, in terms of their size and impact, rather than on their number. Therefore, CPSEs are required to submit details of only 2 projects for scrutiny for the purpose of annual MoU evaluation.
"It is expected that with a reduced number of projects CPSEs will be able to spare sufficient resources for each project to ensure its viability, visibility and noticeable impact. Also, fewer projects would be easier to implement and monitor," the norms stated.
Currently, regardless of size and profitability each CPSE is required to submit details of 10 projects for evaluation under MoU - 5 each for CSR and sustainable development, respectively.
Also, CPSEs are advised to join hands with other public sector companies for planning, implementing and monitoring mega projects for optimal use of resources and synergy of experience and capabilities.
The guidelines continue to exempt sick and loss- making PSUs from allocation of budget for undertaking CSR activities.
Of the total 249 CPSEs, there were 158 profit-making PSUs, as on March 2011.