Corporate Social Responsibility (CSR) has grown since it was legally introduced in 2014. Parliament, the country’s policy-making institution, needs to monitor it regularly to achieve the stated objectives. The role of Parliament members in both Houses, Lok Sabha and Rajya Sabha, on the issue of CSR is also critical. The constant monitoring helps the Government, corporate, and PSUs to undertake their responsibility towards society. – M.Rajendran
The 21st Report of the Parliamentary Standing Committee on Finance is one of the prime movers for bringing the CSR provisions within the statute. The Standing Committee observed that annual statutory disclosures on CSR required to be made by the companies under the Act would be a sufficient check on non-compliance. Section 135(4) of the Companies Act 2013 mandates every company qualifying under Section 135(1) to make a statutory disclosure of CSR in its Annual Report of the Board. Rule 8 of the Companies (Corporate Social Responsibility Policy), Rules, 2014 prescribes the format in which such disclosure is to be made.
A sample of questions that the Members of Parliament (MP), individually and as a group were, pertaining to NGOs involved in CSR Projects, Reasons for the Slowdown in CSR Spending, Expenditure on Sports activities from CSR Funds in Chhattisgarh, Funds Spent under CSR, Measures to Enhance CSR Activities, Social Upliftment under CSR, Mandatory Spending of CSR Funds.
A scan of the questions on the Digital Sansand website shows that while most questions show that the elected members are keen to know how companies spend funds for social initiatives, some sought answers from the Government on how it plans to monitor the spending. Such queries stem from the desire of elected representatives to have a degree of control over how and on what companies spend their CSR corpus. The answers were largely limited to a reiteration of CSR Rules, the eligibility criteria of companies, and the fact that the data collection process was ongoing.
The answers given by the concerned Ministers, or mostly the Minister of Corporate Affairs, were largely limited to a reiteration of CSR Rules, the eligibility criteria of companies, and the fact that the data collection process was ongoing. Since 2014, some MPs have demanded a special provision for all MPs to use the CSR Funds. But this has been shot down.
However, this does not stop them from approaching the corporate and PSUs to deploy their CSR funds in their constituency. Early this year, a question about CSR Funds for MPs was raised in the Lok Sabha. To which Minister of State (Independent Charge) of the Ministry of Statistics and Programme Implementation, Minister of State (Independent Charge) of the Ministry of Planning and Minister of State in the Ministry of Corporate Affairs Rao Inderjit Singh, in a written reply, stated that the Companies Act, 2013 (‘Act’) provides a statutory framework for Corporate Social Responsibility (CSR) through Section 135, Schedule VII and Companies (CSR Policy) Rules, 2014. Section 135 of the Act mandates every company having a net worth of Rs. 500 crore or more, or turnover of Rs. 1000 crore or more, or net profit of Rs. 5 crore or more during the immediately preceding financial year to spend at least two per cent of the average net profits of the company made over immediately preceding three financial years towards CSR as per the CSR Policy of the Company.
He further explained that under the Act, CSR is a Board driven process, and the Board of the company is empowered to plan, decide, execute and monitor CSR a ctivities based on the recommendations of its CSR committee. As the CSR framework is disclosure-based, the companies must file details of CSR activities annually in the MCA21 registry. Singh also clarified that the Ministry does not maintain parliamentary constituency-wise data. All data related to CSR filed by companies in the MCA21 registry, including company-wise, state-wise and district-wise, are available in the public domain at www.csr.gov.in.
To a related question, whether the Government has any plans to mandate a minimum CSR funding amount for every constituency, Singh replied negatively and stated that no such proposal is under consideration of the Ministry. It is a conundrum that CSR Funds are for the welfare of the people who require help. It could be with primary education, health, water, sanitation skill development, or anything necessary to contribute to society and not a burden. The members of Parliament feel that the fund could be better utilised if it can be diverted to their constituency.
The argument in favour of that is that the MP Local Area Fund (MPLAD) sometimes is insufficient to complete a project the support from CSR Funds can help in the completion of such projects. Those who do not favour such diversion of CSR Funds argue that unless there is a legal system, it will be open for misuse.
No doubt CSR Funds are dynamic, and hopefully, the policy makers and corporate would come to an agreement, that will prove to be in the larger interest of society.
