New amendments make it impossible for companies to escape CSR responsibility

NEW DELHI: The Union cabinet has approved changes to the Companies Act of 2013 that make it mandatory for companies to create a ring-fenced escrow account for corporate social responsibility expenditure and transfer unused funds to the National CSR Fund.

The changes also seek to extend dematerialisation of shares to all companies in a phased manner. The Cabinet also extended the term of the Finance Commission by a month to November 30 and expanded its terms of reference to address concerns regarding funds for defence and internal security.

Besides, the cabinet committee on economic affairs (CCEA) approved projects on new railway routes and doubling of lines, worth Rs 6,000 crore, to improve capacity and boost regional connectivity.


FULFILLING SOCIAL RESPONSIBILITY
The proposed changes to the Companies Act will require companies to deposit funds for mandatory corporate social responsibility expenditure for a given fiscal in the escrow account for up to three years, if the amount is part of an ongoing project that requires funding in stages.

Any expenditure due for a fiscal that is not spent within three years will need to be transferred to the National CSR Fund, as per the changes.

Further, if a company does not have an ongoing project that requires funding in stages, then it will be required to transfer unused CSR funds to the National CSR Fund at the end of the fiscal year.

As per the proposed changes, the National Financial Reporting Authority will only be able to bar auditors from statutory audits, internal audits and from valuation, implying that it cannot bar them from practising as chartered accounts.

HYDROPOWER
The CCEA approved Rs 1,600 crore expenditure on pre-investment activities of Dibang Multipurpose Project (MPP) in Arunachal Pradesh, which will be India’s largest hydroelectric project once constructed. The project, with an estimated total cost of over Rs 28,000 crore, will generate 2,880MW (12x240MW) power. The dam, at a height of 278 metres, will be the highest in the country. The project is expected to be completed in nine years from receipt of government sanction.

NEW RAIL PROJECTS
The CCEA also gave its go ahead for construction of a third railway line between Allahabad and Pandit Deen Dayal Upadhyay Junction (formerly Mughalsarai) at an estimated cost of Rs 2,650 crore. The project, expected to be complete by 2024, will generate direct employment of around 3.6 million man days, the government said.

Doubling of the New Bongaigaon-Agthori via Rangiya railway line in Assam was also approved by the cabinet to handle increasing freight and passenger traffic in the region. The Rs 2,042-crore project is expected to generate direct employment of about 3.4 million man days and will be complete by 2022-23.

The Cabinet also approved construction of a new railway line between Sahjanwa and Dohrighat at an estimated cost of Rs 1,319.75 crore.