"Mandatory wealth creation will benefit everybody"

jasleen

Jasleen Kaur | May 26, 2014


Pradeep Singhal, executive director of the Bharat Heavy Electricals Limited

At Bharat Heavy Electricals Limited, it is not just about corporate but also personal social responsibility, where employees are encouraged to contribute socially, says Pradeep Singhal, executive director of the company. In an interview with Jasleen Kaur, Singhal talks about the importance of bringing flexibility in the CSR rules to foster innovation. Edited excerpts:


How does BHEL see CSR?
The CSR has to be a top-driven approach. And it need not be just about money. It is not about the company as a whole, it can be done with individual contribution as well which we call personal social responsibility (PSR). This is what we are developing in our company.
We had carried out a campaign, ‘vision to all’, last year. Around 53,000 people, including employees and their families, had pledged donation of their eyes. For something like this, no money was required. Apart from this we encourage our employees to contribute for various causes. We have been doing CSR from the beginning and now it has become mandatory and we do not find it difficult at all.

What is your opinion on mandatory spending on CSR?
From corporate hobby, CSR has now become a corporate duty. This binding of wealth creation will make everybody a beneficiary. The companies will now have to go beyond making profits to improving social welfare. As far as PSUs are concerned, CSR has been part of our business activity since inception. Till now we were working as per the CSR guidelines of the department of public enterprises (DPE). Now new rules have come so we will follow those.

Will there be any change in the way PSEs look at CSR?
I do not see much change as far as our company is concerned. More or less we have already been following the guidelines, now issued under the new Companies Act: for example, we follow a rigorous selection procedure for finalising NGOs, as mentioned under the Act.
The major change will take place with companies which have not been spending on CSR. A lot of companies will be covered under the new act, many of which were not doing CSR earlier. The only change that will come in the PSUs will be that under Schedule 7 a lot of activities have been defined so we have to confine to those only.

Are rules and regulations mentioned under the Companies Act clear enough to give scope of innovation to companies?
Sometime back I read about a company which made equipment with suction machine, to be put in front of the rail engine for cleaning the track. We are not sure whether this kind of innovative approach would be covered under CSR or not.
The DPE guidelines were very elaborate and covered everything. In fact we had requested DPE to come with their guidelines, if possible, for PSUs after the new Companies Act as well.

The new rules have their own advantages and disadvantages. The rules will ensure private companies spend on CSR. But rules also handicap the innovation at times. This is where flexibility is required. The government has done their best, after consulting various stakeholders. But over a period of time it will still improve further.

DPE guidelines allowed companies to spend the money in three years, which is not allowed under the new Companies Act. Would it act as a challenge?
At times we do face difficulty in spending money on CSR activities. Let’s assume we decided to do something in the rural sector and due to some environmental concern we do not get clearance. Under the DPE guideline there was some flexibility which allowed carrying forward the fund. But right now the Companies Act says if a company is not able to spend then we have to give reasons in our annual report. It does not talk whether it can be carried forward. If the flexibility is given and it is made non-lapsable, it will serve the intended purpose.
To me it appears that in due course of time, things will settle and the government can amend the rules, if required.

How do you scrutinise your projects or NGOs? Did you ever face any problem in finding the right NGO?
Most of our projects are outsourced and only a few activities we do ourselves. We have a robust three-tier system of selecting the NGO and project consisting of executives of which I happened to be the chairman. After our recommendation, it is approved by the board.
We have never faced any problem because our scrutiny process is very strict. In fact NGOs sometimes are unhappy that we ask so many questions while selecting them. Our selection process is quite similar to what has been mentioned in the rules of CSR.

The government does not intend to audit the CSR work. Do you think it is needed for effective implementation?
The government does not intend to audit CSR projects, perhaps because they think companies will be counterproductive. Ultimately media and civil society will judge and decide what genuine CSR is.

First of all, the number of companies is going to be very huge and the money would be in the range of '15-20,000 crore. So doing any kind of audit also requires a lot of effort.

Public sector companies are subject to audit as per routine. Like other activities, for this activity as well the audit has been done in the past. So we do not find anything new or difficult. I think it is not necessary even for the private sector.

Initially companies may think that they have to shell out money from their own pocket. But in the long run, apart from doing the social good, it is going to help the companies as well. The CSR helps the company to build a brand image, like the Tatas have built over the years. It is like an investment opportunity for the companies. We have been doing so much good work under CSR which gives satisfaction to employees as well.

What is your view on companies getting tax benefit under CSR?
We get 100 percent tax benefit when we give money to the NGOs, under Section 35 AC of the Income Tax Act, 1961. But if the government can give tax benefit when companies directly spend on activities, it will give boost to the companies. There are many small companies which like to do CSR themselves.
DPE had proposed to form another company to manage CSR funds of PSUs. What is your opinion on that?

If that happens, I feel the basic advantage of carrying forward the CSR project in line with the company’s goals and objectives may be missed. If a separate company is formed the CSR policy won’t be company-specific.

The priorities and areas to be covered under CSR may differ from company to company. It may be good from social angle that all the resources will be pooled up and better projects may come up. But it will not benefit the company as such.

Of course, it will be very difficult for some of the companies to implement CSR, but still it will evolve over a period of time. And once they are able to get through good NGOs a part of the problem will be over.

What are your plans for next five years?
We have been doing a lot of work in education and health sectors – which are the essential sectors – and we will continue working on that in future as well. We would also like to continue working on areas of renewable energy, solar, environment protection and skill development. Apart from that our board will take a call on further improving our CSR policy. Our operations are spread all across the country and we have had pan-India approach in implementing these activities.

We are also setting up one special care home for critically ill cancer patients along with an NGO. In Mumbai, we are supporting one blood bank centre through Rotary Club for thalassemia patients. That is a state-of-art blood bank and second best in Maharashtra. These patients get free blood transfusion which is otherwise a very costly treatment.

(This interview appeared as part of a CSR special package in May 16-31, 2014 print issue)

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