In a bid to give fillip to the corporate social responsibility (CSR) norms enlisted in the Companies Act, 2013, the ministry of corporate affairs is mulling to have an annual report which will highlight use of CSR funds.
One of the suggestions highlighted by the government-nominated high-level committee on CSR, include having an annual report card on CSR funds for better and effective utilisation of resources, according to a senior government official.
“The government wants to have an annual report similar to the economic survey which will highlight status of funds used in CSR activities. The report will also have an outcome measurement statement to give a fair understanding of the usage of funds,” the official told CNBC-TV18 on the condition of anonymity.
The corporate affairs ministry will be the custodian of this report and through an annual release would focus on the “outcome measurement statement” of the CSR funds.
A High Level Committee on Corporate Social Responsibility — 2018 (HLC-2018) was constituted by the government in 2018, under the chairmanship of secretary, ministry of corporate affairs Injeti Srinivas to review the existing framework and guide and formulate the roadmap for a coherent policy on corporate social responsibility.
All companies 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 have to spend 2 percent of their average three-year annual net profit towards CSR activities in a financial year.
The provisions of section 135 of Companies Act, 2013 pertaining to corporate social responsibility came into force in 2014 with a view to promoting responsible and sustainable business through inclusive growth.
The high level committee on CSR is also in favour of strict measures for enforcing CSR norms. “The HLC is likely to submit its final report to MCA soon and is understood to have recommended measures that will focus on increase in compliance, reporting obligations to facilitate social audit of the funds so that government can assess ground level impact of funds spent under CSR,” the official added.
Some of the measures suggested by the HLC are likely to be included in the companies Act with immediate effect. “MCA is preparing to propose amendments in Companies Act, 2013 to facilitate changes in CSR norms. The idea is to accommodate as many changes as possible so that the amendments can be moved in the current Budget session itself,” the official added.
Some of the other measures that are likely to be a part of the suggestions of HLC include:
- Companies may be allowed to spend CSR funds over a period of three years instead of within one year
- Companies may be allowed to transfer unspent CSR funds to an escrow account at the end of year
- Provision for mandatory spending in naxal and backward areas may be introduced
- Companies may be given relief on the local area clause