Milking The Cash Cow: Modi Government Makes Welcome Amendments To Norms On CSR
Milking The Cash Cow: Modi Government Makes Welcome Amendments To Norms On CSR
Much like Kamdhenu, the cow of plenty, India's private sector companies making hefty profits could be the solution to problems such as poverty, lack of education, inadequate health care and lack of desired development and growth. The Modi government has realised this completely and is set to use CSR as a positive way to elicit much needed cooperation from the private sector. Of course India Inc. is doing a lot in these fields, but a lot more is needed if India has to become a super power.
The NDA government has made alterations to norms governing expenses on CSR or Corporate Social Responsibility undertakings under fresh Company Law passed recently in 2013 which came into effect on April 1, 2014. A particular class of profit making companies will have to now shell out at least 2% of 3 year average net profit towards CSR.
This requirement is part of the Companies Act, 2013 and a majority of the requirements have already become operation since April 1 this year. According to the rules, companies have been given permission to build on CSR capacities via their own personnel through institutions provided expenses such as these do not go beyond 5% of the total expenditure incurred on social welfare activities within a single year. The 5% cap would also be inclusive of expenditure on administrative overheads.
Modifications have been made to the Companies (CSR) Rules 2014. Earlier, companies were given the permission to build CSR capacities of their own personnel as well as that of implementing agencies through institutions with proven track record of at least 3 years wherein such expenditure should not exceed 5% of total CSR expenditure of the company in one financial year.
The new CSR norms will hold true for companies having at least Rs. 5 crore net profit or a 1,000 crore rupee turnover. This translates into CSR norms for companies with net worth amounting to at least 500 crore rupees. Several activities have been included under the ambit of CSR including livelihood improvement, rural development projects, reducing social and economic inequalities as well as safeguarding the nation's art, culture and heritage.
The changes in norms governing expenses on CSR norms under the new law are a good instance of how law can be used to bring about social justice and end problems like poverty and unemployment. The Corporate Affairs Ministry has also indicated the 5% cap will include expenditure on administrative overheads which is also fair for the companies.
The private sector companies making profits have to function well and remain healthy to support the livelihood of their employees as well. Consider that large companies such as TATA and Reliance do a lot for the welfare of people and one understands why they are making profits too. CSR is very good for improving the brand of the company and this is why profit making companies that want to do good and get good returns too should view the change in norms as a good sign. Good days are hard to come by, given the vagaries of chance. But at least the consolation that better days can come by through joint efforts of both the government and the other parties desiring welfare of India is a welcome piece of news. Legislations like the Companies Act(2013) with effective amendments can work their magic touch for uplifting the masses and making India the super power it deserves to be.
