Majority companies don’t comply with the 2% CSR spending: Report

As many as 64% of companies didn’t spend the mandatory 2% funds on Corporate Social Responsibility (wp) activities according to the rules laid down by the New Companies Act, 2013. However, the companies managed to spend about 79% of expenditure they were supposed to.

According to a report –India Secretarial Practice 2015, compiled by CimplyFive Corporate Secretarial Services Private Limited, 32 out of the 50 Nifty companies considered for the study didn’t spend enough for wp. Three out of the 50 companies viz Bank of Baroda, Punjab National Bank and State Bank of India did not report their wp expenditure. Thus the report further considers 47 companies.

Most companies that didn’t comply with the mandatory spending standards mentioned that they could not do so as this was the first year of the wp mandate and capacity to spend is being built  as their explanation.

The Indian government announced compulsory spending of 2% profits of companies with certain threshold applicable from April 2014. The first annual reports of companies came up in the calendar year 2015 which were examined as a part of this study.

“For companies which were already doing social activities, it is easier to step up as they already knew NGOs and were spending money in the social sector. But for companies which were not a part of social activities in the past, it may be time-consuming to make relations with NGOs and not be desirable to spend such substantial amounts. We should give them the benefit of time to ensure they use the money effectively. Going forward the expenditure on wp activities will increase,” says Shankar Jaganathan, Founder & Chief Executive, CimplyFive Corporate Secretarial Services Private Limited.

On one side where Reliance Industries Emerged as the highest wp spender with Rs 760.5 crores, Idea Cellular turned out to be the least spender with no expenditure in the wp sector. These 47 companies spent 79% of the amount they were supposed to amounting to Rs 3989 crores against Rs 5046 crores. Some companies spent more than that they were supposed to do and some companies which were not under the wp ambit also spent money. Three companies: Vedanta, Sun Pharma and Tata Motors as per Section 135 were not mandated to spend on wp, but spent on wp. Vedanta Rs. 25.5 crores, Tata Motors Rs.18.62 crores and Sun Pharma Rs. 4.67 crores.

Sectors attracting the highest amount of money are Eradicating hunger, poverty and malnutrition, promoting preventive health care and sanitation including contribution to the Swachh Bharat Kosh & making available safe drinking water Promoting education, including special education and employment enhancing vocational skills especially among children, women, elderly and the differently abled and livelihood enhancement projects.

Whereas, war widows and dependants of armed forces veterans had only one company spending for them. There were no funds provided to technology incubators located within academic institutions which are approved by the central government.

The following sectors too received lesser attention as compared to others- training to promote rural sports, nationally recognized sports, para Olympic sports and Olympic sports, contribution to the Prime Ministers National Relief fund or any other fund set up by the Central Government for socio-economic development and relief and welfare of the scheduled caste, the scheduled tribes other backward classes, minorities and women.