New Delhi| August 13, 2019| The recent Amendment to the Company’s Act in relation to CSR provisions shows how the CSR scenario in India is still evolving and that the government is particular about corporate India’s engagement in the social development sector, according to Charities Aid Foundation (CAF) India. However, the organisation said that the amendment alone cannot address all the challenges that are currently being faced by corporates in effectively carrying out their Corporate Social Responsibility (CSR) to maximise social impact. “In 2013, the Company’s Act had made it mandatory for companies having net worth of over ₹500 crore, or a turnover of ₹1,000 crore or more, or net profit of ₹5 crore or more to disburse two percent of their profit towards CSR. Over the past five years, corporations were able to bring about a positive social impact through various CSR campaigns. While, the new amendment is more stringent and will goad companies to spend 2 percent of their profit for CSR, there are several challenges that need to be addressed,” says Meenakshi Batra, CEO, CAF India.
CSR Ecosystem: Challenges
The CSR spend in the past five years stands at more than Rs 50,000 crore against an expected target of Rs 56,000 crore. “The target fell short by 6,000 crore. When notices were sent to companies, who did not spend on CSR, the reasons cited by most companies were, lack of means and good avenues to invest,” explains Batra.
The Schedule VII of the Company’s Act lists the activities that may be included as a part of CSR. But in its engagement with corporates, CAF India realises the significant lack of understanding and expertise of Schedule VII among corporates. Many don’t have the network or the talent pool to formulate and execute CSR policies. In many cases, CSR committees are non-functional. “Besides this, due to a lack of an appropriate network and talent pool, many companies often fail to focus on the impact and sustainability of a project. They find it difficult to choose the right projects in the right areas, with the right implementing partner,” says Batra.
The Amendment has made CSR regulations more stringent. Besides imposing a fine and imprisonment of the concerned officials, if a company fails to disburse their unspent CSR funds within three financial years, the amount will be transferred to a Schedule VII fund (like the Prime Minister’s relief fund or any other fund run by the central government). This transfer of unspent CSR money to a Schedule VII fund goes against the essence of CSR where corporates are required to have a well-defined project in identified locations.
“The concept of CSR was not just to make companies disburse their funds towards socio-economic development, but it also aimed to harness the energies and skills of corporate India and channelize them towards social good. Transfer of funds to Prime Minister’s relief fund or any other government fund would eliminate any direct involvement of corporates during implementation of the projects. However, corporates still have three years to deliver which, going by experience is a reasonable time period,” says Batra “Therefore, the need of the hour is to address the above-mentioned challenges. A strong law cannot necessarily ensure maximum social impact. It should be lived up in both letter and spirit,” she adds.
There are multiple avenues – education, health, sanitation, environment, women empowerment, agriculture etc. – that are in dire need of funds and volunteers. CAF India, over the past 20 years has provided expertise and avenues to over 300 companies on formulation and implementation of CSR policies, designing good projects and connecting them to credible NGO partners, who turned their CSR vision into a reality. In our pursuit to build a society motivated to give ever more effectively and transform lives and communities, we see the amendments as positive enablers. Visit our website www.cafindia.org for more information
Notes to Editor: About Companies (Amendment) Act, 2019:
- New Sub-sections 135(6) & 135(7) added in relation to unspent money of CSR & Penalties will beapplicable from FY 19-20 onwards.
- Unspent amount has to deposit amount to a special account.
- Unspent amount has to be spent within following three FY.
- Failure to spend within timeframe attracts penalty (sec 135 (7)):
- Company shall be punishable with fine which shall not be less than fifty thousand rupees but which may extend to twenty-five lakh rupees.
- All responsible officers of company shall be punishable with imprisonment for a term which may extend to three years or with fine which shall not be less than fifty thousand rupees but may extend to five lakh rupees, or with both.
- Such unspent, after 3 FYs has to be transferred to a fund specified in Schedule VII for e.g. Prime Minister’s Relief Fund.
For further information, contact:
Anindita Datta Choudhury, Lead, Media & Communications, CAF India
Ph: 9871515804; email: This email address is being protected from spambots. You need JavaScript enabled to view it.