New Companies Act to channelise Rs 20,000 crore to social sector
Jasleen Kaur | February 15, 2014
Corporate social responsibility (CSR) has been part of the business activity of the public corporate sector, it is the private sector that now has to play its role in this area, says Vandana Chanana, general manager CSR, GAIL (India) Ltd.
Addressing the ninth national convention of the Global Compact Network in Delhi on Friday, Chanana said that section 135 of the new Companies Act is a huge opportunity for the private sector to come into the fray. "CSR has been part of our DNA since the beginning. Our presence has been at the remotest areas across the country. We have made sure that our township creates islands of prosperity."
Talking about leveraging 2 percent of the profit to transform India's social agenda, Chanana said, “The good thing is that the bill has brought CSR into the boardroom. It is forcing corporate houses to pay attention to this."
She also said that an estimated Rs 20,000 crore is too less a budget compared to the rural development budget of Rs 2 lakh crore set aside by the government and thus corporate houses will have to see it very differently from the government. “The focus will also have to shift from NGOs to the community at large, to understand their priorities and needs, so that the projects become sustainable and benefit them," she added.
Under the Companies Act, 2013, firms with a net worth of at least Rs 500 crore, a minimum turnover of Rs 1,000 crore or a net profit of Rs 5 crore are required to spend at least 2 percent of their three-year average annual net profits towards CSR activities. This provision is to generate an estimated spending of Rs 20,000 crore a year spending on CSR activities.
Anand Kumar, executive director for CSR at NTPC Limited, said, "It is a welcome move. We need to do more in engaging the stakeholder. But the government should have a strong monitoring mechanism for successful implementation of CSR.”
Talking on behalf of the private sector, Bharat Wakhlu, resident director, Tata Services Limited, said many private companies like those of the Tata Group have already been contributing to the social sector for the last 80 years. "It is a powerful concept. It is not going to disregard the good work that is already happening in the country."
Deepak Arora, CEO, Essar Foundation which drives the Essar Group’s CSR initiatives, called for greater engagement of the corporate and NGO sectors. He said this step, unlike philanthropy, would be more output oriented.
The only representative from the NGO sector, Thomas Chandy, CEO, Save the Children, India, questioned whether the 2 percent contribution to CSR would actually change the social agenda. He said the corporate sector would have to work towards creating models that can be scaled up further. He also highlighted the fact that it is not easy for the NGO sector to deal with corporate houses. "They don't think we are serious professionals. We are treated as event managers. They need to understand that you have to be patient while working in the social sector. Sometimes you don't get results for years." He suggested adoption of accountability measures to show impact of the work and to end the mistrust between NGOs and corporates.
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