The government of Telangana is looking to access more CSR funds to fulfil its responsibility towards the population of the state. Struggling with financial constraints, the authorities have been pressuring companies to align their CSR activities with state projects. According to industry sources, the district collectors and top bureaucrats of Telangana are actively convening meetings to push this agenda.
CSR Money is Government’s Money?
Recently, a high-level meeting was organised in Telangana with executives from about top 20 pharmaceutical companies. The meeting was addressed by a senior Health Department official, where it was made clear to the delegates of the organisations that the government expected these companies to use their CSR funds to support the maintenance of government hospitals.
“In the meeting, we were told that our CSR money was Government’s money, and that we would be assigned Government hospitals the maintenance of which we must fund,” revealed a representative. The government also indicated that future meetings would involve company chairpersons and managing directors.
While the companies willingly extend support to various government projects by forming public-private partnerships through CSR initiatives, the government is looking to take a step ahead and dictate how the CSR funds are to be utilised and allocated. In addition to this, the officials of Telangana Pollution Control Board (TGPCB) in industrial districts have been directed by district collectors to gather detailed CSR spending information from companies, including net profit data from the past five years.
A similar incident happened in the state a year ago, when the Telangana State Industrial Infrastructure Corporation (TGIIC) sent a letter to companies in the Pashamylaram Industrial Park seeking ₹15 crore for developing an approach road from the Outer Ring Road (ORR). This road, initially budgeted at ₹95 crore by the Roads & Buildings Department, saw cost escalations due to the COVID-19 pandemic and other issues.
This pattern of government appeals for corporate funding has been ongoing for over a decade in the state of Telangana.
What the Companies Act, 2013 Says
According to the Companies Act, 2013, any company with a net worth of ₹500 crore or more, a turnover of ₹1000 crore or more, or a net profit of ₹5 crore or more in the preceding financial year is mandated to form a Corporate Social Responsibility Committee. It also states that at least 2% of the average net profit over the preceding three years of the companies meeting above conditions must be spent on CSR activities, with a focus on local areas. The enforcement of the act falls under the purview of the Central Government. The Union government seeks compliance from companies leaving the decision of how to spend its funds to the companies’ leaders. The state governments do not have a say in it. All it can do is make appeals to companies.
“Our outlay for the CSR and the activities we take up under the head are determined at the beginning of the financial year, and cannot be altered midway through. Besides, the Act does not consider monetary funding to the Government as CSR activity,” a company representative explained.
For clarity and compliance, the representative suggested that the Central Government should issue specific instructions or amend the Act if it agrees with the view that CSR funds should be directed to state governments. This would simplify the process for companies, allowing them to deposit CSR funds directly to the state, thus avoiding the administrative burden of managing CSR activities themselves.
