PSEs not in favour of a separate company to manage CSR

Industry experts say it would be better if CPSEs are allowed to spend the way they want to

jasleen

Jasleen Kaur | February 26, 2014



The union government's proposal to float a company to manage corporate social responsibility (CSR) funds of all the central public sector enterprises (CPSEs) has got mixed response from the fraternity. The public enterprises ministry has proposed to set up an institutional structure in form of a company or a trust to ensure efficient implementation of this social initiative and to free companies from additional responsibility. But industry experts say it would be better if the CPSEs are allowed to spend the way they want to.

S K Jha, head of corporate communications at Oil and Natural Gas Corporation Ltd (ONGC), says that instead of forming a separate company, collaborating with state governments for CSR is a better idea. According to Jha, Maharatnas like ONGC never faced the problem of money, but the one of searching a right, sustainable project to fund: “This [collaboration with the state governments] will help both ways: first, there will be no involvement of NGOs, and, secondly, even the government needs money to fund its projects for social sector.”

Jha also said that if the companies are forced to spend a fixed amount on CSR activities then some mechanism would have to be developed: “Our job is not governance, but only helping the government.”

Under the new companies Act, 2013, corporate houses, starting next fiscal year, must spend two percent of their profit on CSR, provided they have a turnover of rupees 1,000 crore and more, or a net worth of rupees 500 crore and more, or a net profit of rupees five crore and more.

Also, firms have to set up a CSR committee, including at least one independent director. The act gives no provision to carry forward the unspent CSR amount in a financial year. But the guidelines issued by the department of public enterprises (DPE) in 2013, the nodal agency for CPSEs, had allowed to carry forward the unutilised budget to the next year.

M J Joseph, additional secretary at ministry of corporate affairs, told Governance Now that the ministry may soon make changes in the CSR guidelines for CPSEs to match the ones issued by the DPE. He also said that opening a separate company altogether may not be the best solution. Speaking on the sidelines of a CSR summit organized by ASSOCHAM in Delhi on Tuesday, Joseph said the notified rules of CSR under the new companies act would be out only by March end.

A senior official at NTPC said, on the condition of anonymity, that he agreed with Jha’s views, and that this business should be left to companies. “What is the point of opening a new company for such a task. The PSEs can manage their business well,” he said.

As per a Comptroller and Auditor General (CAG) report, 47 profit-making central PSEs failed to comply with the CSR norms prescribed by the government in 2011-12.

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