India Inc on Tuesday cautioned corporate affairs minister Sachin Pilot against any “interventionist” measures on corporate social responsibility spends. Corporate India said any CSR spend should be viewed from a group perspective, including trusts and foundations rather than individual companies within a group. The industry also sought 100% tax exemption on CSR expenditure made by them.
The minister differed on the proposal for listing group CSR activities under individual companies and sought more time to decide on the tax exemption issue. The ministry, Pilot said, was still fine-tuning CSR rules and penalties.
Sources said the industry also expressed opposition to any government-led special purpose vehicle to oversee CSR expenditure.
Their basic message: Companies have been spending on CSR activities and will continue to do so, but the government, in its enthusiasm, should not make it mandatory and start penalising them.
A public sector firm expressed concern that CSR could become useful for vested interests armed with Right to Information.
The industry broadly appreciated the initiative to seek its views, stating it was the first instance of such an interaction. Companies like Tata Steel, Vedanta Group, Wipro, Max Group and Raheja Developers along with members of industry chambers participated in the meeting.
Pilot called the meeting to seek the industry’s views on the clause in the new Companies Bill which makes it mandatory for profitable government and private companies to allocate 2% of their average profits accrued in the preceding three financial years on CSR programmes.
Speaking to FE, Sunil Kant Munjal, joint managing director of Hero MotoCorp said: “The meeting was fruitful. We have conveyed to the minister that the industry has been doing CSR activities and do more in future. However, the government should ensure that it does not create an extreme situation where its role becomes interventionist”.
Navin Raheja, chairman and managing director of Raheja Developers told FE that he pointed out that the government should not come out with any penal provisions whereby it starts punishing companies which it finds did not adhere to its definition of CSR.
There were differences between the minister and the industry treatment of philanthropic spending. While the minister said such activities would not be construed as CSR, the industry wanted it to be treated as such.
Members of the industry also said CSR should not been seen as a one-way act by the industry but there should be matching contribution by state government and district administrations.
On his part, Pilot assured the industry that the government would not get into auditing companies’ books to check CSR spends and the companies would be free to make self-declarations.
However, Pilot made it clear that India Inc will have to mandatorily spend 2% of their annual profits on ‘measurable’ social activities as part of their CSR initiatives. Pilot said the government wants to be seen as an “enabler” and not the driver of CSR initiatives. The minister said that India Inc was happy to contribute towards CSR activities. “I heard their suggestions and plans on CSR. I will strive to address their concerns, if any, on implementation of CSR initiatives. This has to be done on a voluntary basis by the corporates themselves,” Pilot said.
He said the ministry was working out the rules and penalties for those companies which do not create a CSR fund or do not spend their CSR funds or fail to report their CSR activities to their shareholders and the regulator.
“The corporate affairs ministry will soon work out and put up a standard performa on its website. This can be used by the companies to furnish the details of their CSR activities, funds allocated and used, etc. We will encourage India Inc to do this on a voluntary basis. But there will be penalties for those who don’t. We are in the process of drafting the rules,” Pilot said on the sidelines of a day-long meeting with the corporate sector on CSR activities.
On tax breaks sought by the industry, Pilot said: “Let me go back to my ministry and discuss it. I will also talk to the finance ministry about this. But first, we need to discuss it internally.”
Speaking about the CSR funds generated by the public sector enterprises, Pilot said the unspent amount of the CSR fund will need to be transferred to a non-transferable pool which will be maintained by the individual PSU. He said a National Foundation of Corporate Social Responsibility (NFCSR) has been set up within the Indian Institute of Corporate Affairs for which the government has provided an initial corpus of Rs 1.5 crore. NFCSR is likely to receive similar endowments from many non-governmental sources in the near future, he said.