Which's the most philanthropic of 'em all? RIL tops list with Rs 640 cr CSR spend; PSUs NTPC, ONGC follow next

Philanthropy is a private matter, but not for India Inc The Companies Act, which was amended in the recently concluded budget session, mandates that executives of companies that broke corporate social responsibility (CSR) rules be imprisoned for three years, in addition to fines ranging from Rs 50,000 to Rs 25 lakh. But this is not the first attempt at tackling companies that have not spent their yearly outlay on CSR. The earlier law had similar provisions, but this is the first time that companies stand to be prosecuted for their lack of charitable feeling, much to the chagrin of industry leaders.

A week within the introduction of the new provisions, the government backtracked on its policy revamp, issuing a statement on August 13 that it will not operationalise the changes to the Companies Act pertaining to CSR spending. The decision took cognisance of recommendations made by a high-level committee that suggested violations of CSR spending norms be treated as civil offences, liable to pecuniary punishment in the form of fines. The removal of jail time for CSR violation will come as relief for India Inc, which is grappling with an economic slowdown in the domestic market.

Indian companies’ spending on CSR has been consistently rising since the government’s 2014 diktat that companies spend 2 per cent of their average annual profit from the past three years on CSR activities. The rule was implemented for companies with net profit in excess of Rs 5 crore, or net worth of Rs 500 crore, or Rs 1,000 crore turnover for the financial year ended March 2015. According to the ratings agency CRISIL, overall CSR spends by Indian companies crossed Rs 50,000 crore, four years after the new rules came into effect.


But the trend that would’ve prompted the seemingly harsh amendment to the Companies Act is that in three of the past four years, the amount spent on CSR activities by the 100 biggest companies was less than the prescribed expenditure. Data compiled by KPMG India shows that only a third of the planned outlay was actually spent in FY15. The gap was narrowed in the subsequent two years, with the money spent exceeding the legally prescribed amount in FY18.

According to the survey conducted by KPMG India, CSR spending on welfare schemes by India’s biggest firms amounted to Rs 7,536.30 crore for FY18, roughly 50 per cent more that the quantum of funds spent in FY14 – the first year since the government required public and private companies to spend at least 2 per cent of their net profits on social development projects in fields such as health and education. In its report released yesterday, the high-level committee on CSR has recommended that CSR spend by corporations be made tax-deductible, a move that could help make the initiative more mainstream.

The KPMG survey reveals that the power sector was the leader in CSR spending, followed by banking, IT and metals. The chemicals and media industries were underperformers, registering only Rs 22 crore and Rs 25 crore in CSR spending respectively. The majority of these funds were funnelled into the education and healthcare sectors. The two major thrust areas for CSR funding received Rs 3,893 crore, more than 50 per cent of the total spending of companies in 2017-18.

Moreover, 60 per cent of projects undertaken by corporates were in these two fields. Investment in rural development and environmental causes also received significant outlays from corporate India. However, even those target areas which received a bigger chunk of the outlay, saw the CSR pie grow smaller. Total CSR spend on education was Rs 2,202 crore in FY18, compared to Rs 2,404 crore in FY17. A similar trend can be found in spending on environmental causes.

However, despite the overall increase in the amount spent on CSR activities, there was a marked decline in the number of projects executed. In 2016-17, 1,897 CSR projects were undertaken, as compared to 1,517 projects in the subsequent year. This anomaly can be attributed to corporate entities spending more on focused projects instead of diffused outlay on multiple such endeavour.

According to the Ministry of Corporate Affairs, Reliance Industries spent Rs 640 crore towards CSR activities, the highest among Indian companies. Public sector companies NTPC and ONGC came second and third on the list, with Rs 482 crore and Rs 409 crore respectively spend on CSR projects. Tata group companies Tata Consultancy Services (TCS) and Tata Steel also made the top ten, as did Infosys.