‘Voluntary CSR not working, to be made mandatory’

Veerappa Moily said the new Companies Bill would make it mandatory for corporate to earmark part of their profit for corporate social responsibility.

Last Updated: Jul 20, 2011, 17:20 PM IST

New Delhi: Regretting that the concept
of voluntary CSR has not picked up in India, Corporate Affairs
Minister Veerappa Moily on Wednesday said the new Companies Bill
would make it mandatory for corporate to earmark part of their
profit for corporate social responsibility (CSR) initiatives.

India Inc, the new Minister said, "needs to develop a
culture of voluntary CSR...CSR cannot be considered only as a
charity it is more of a social business...As my predecessor
has said that 2 per cent mandatory provision (for CSR spend in
the Companies Bill 2009), will stay."

The government is in the process of replacing the
half-a-century old Companies Act, 1954 with a new law. The
Companies Bill 2009 is expected to be taken up for
consideration and passage in the monsoon session of Parliament
beginning August 1.

Noting that CSR culture is yet to find favour with
India Inc as in developed countries like the US and the UK,
the Minister told PTI in an interview, "all the 60 years we
tried the concept of voluntary CSR. Unfortunately, it did not
catch up."

The suggestion for earmarking a part of a company’s
profit for CSR was floated by the Parliamentary Standing
Committee on Finance, which scrutinised the Companies Bill,
2009.

Subsequently, the MCA proposed that every company
having (net worth of Rs 500 crore or more, or turnover of Rs
1,000 crore or more) or (a net profit of Rs 5 crore or more
during a year) shall be required to formulate a CSR Policy.

"In case any such company does not have adequate
profits or is not in a position to spend prescribed amount on
CSR activities, the directors would be required to give
suitable disclosure/reasons in their report to the members,"
the Bill says.

Industry has for long been opposing this provision as
according to them they should be allowed to monitor
implementation of CSR themselves without the government
intervention.

At present, spending on CSR activities is part of the
voluntary guidelines laid out by the MCA and it draws no penal
provisions.

However in case of PSUs, those government companies
whose net profit is less than Rs 100 crore have to contribute
3- per cent of their income for CSR, PSUs with profits between
Rs 100-500 crore would be required to earmark 2-3 per cent.

Futher, those companies earning a profit of Rs 500
crore and above, CSR spending should be between 0.5 to 2 per
cent of the net profit.

PTI