India Inc will be investing around Rs 22,000 crore towards corporate social responsibility (CSR) activities once the provisions of the recently amended Companies Act making it mandatory for such allocations get implemented, according to consultancy firm Ernst & Young.
"Given the mandate it is estimated that nearly 16,500 companies will invest Rs 22,000 crore towards CSR," Vijay Ganapathy from EY India's advisory services said speaking at a seminar on CSR.
He said as per the provisions of the new Companies Act, any company having a turnover of more than Rs 1,000 crore or a networth of over Rs 500 crore or a net profit of over Rs 5 crore, has to spend 2 per cent of their annual net profit on CSR activities.
A statement from the All-India Association of Industries (AIAI), the organisers of the seminar, quoted Ganapathy as saying such a move will be extremely beneficial for the economy as it will help ensure inclusive growth.
It can be noted that the provision to make such spending mandatory for for-profit companies had run into big controversy at the drafting stage. It however, ultimately got pushed by the previous government which had launched a slew of such initiatives.
Tata Housing Development Company's head of corporate sustainablity Ajit Pattnaik explained that the broad categories of interventions for the companies include education, special education, healthcare, preventive healthcare, water, sanitation, training in sports, art, culture, rural development projects, among others.
He added that the Schedule 7, which lays down such contours of activities, is not restrictive towards geographical boundaries of beneficiaries.
Law firm Nishith Desai Associates' partner in-charge of social development practice Milind Antani, said in the event of a non-compliance with the guidelines, a company has to explain the reasons for the same and may also be penalised with fines and imprisonment for officials.
"Any company, which does not report non-compliance towards the CSR rule is liable to be charges of penalty in the bracket of Rs 50 thousand to Rs 50 lakhs. Also, the board of directors may be charged with imprisonment for 5 years and/or fine worth Rs 25,000," Antani said in a statement.