Imphal Review of Arts and Politics

Companies operating in India with over Rs. 5 crore net profit a year are bound to contribute 2pc of their profit to CSR fund

Why is the NE Not Getting its Fair Share of the Approximate Annual Rs. 1 Lakh Crore CSR Fund

For the year 2020-2021, the accumulated funds under the head Corporate Social Responsibility, CSR, is a whooping Rs 1 trillion or Rs. 1 lakh crore. Unfortunately, the eight states of the Northeast (Sikkim included) received only Rs. 196.39 crore of this amount, which is much less than 1 percent as per figures available with the Federation of Indian Chambers of Commerce and Industries, FICCI, New Delhi. According to the Government of India CSR website, of the Rs. 196.39 crores that came the way of the Northeast, Manipur received only Rs. 10.3 crores from 42 different companies during the financial year. This is unfortunate for going by most parameters, the Northeast certainly deserves more than this share. First, it is rich in forest and mineral resources and many companies have made capital of this fact. Again, from the point of view of developmental responsibility of the government, data suggest the Northeast is not getting its fair share. Its rural population is 84 percent, far higher than the national average of 70 percent. People living below the poverty line in the Northeast region is 34.28 percent, again far above the national average of 26.1 percent. And yet, when it comes to allocation of Corporate Social Responsibility, CSR, funds, meant precisely for social upliftment, the eight Northeast states are virtually sidelined. Something surely is seriously wrong with this. The figures are so stark that even the FICCI thought it fit to have a special session on the Northeast in a meet at its headquarters in New Delhi recently to discuss matters related to the CSR spendings. A team of the FICCI will also be visiting Manipur soon to study the matter further.

The fault is also not always about the Northeast falling off the map when it comes to these matters because of a lack of concern of those handling these funds. It is also very much about the Northeast states not taking the trouble to familiarise themselves to follow the mandatory protocols for becoming eligible to contest for these funds. Just for an example, it is for instance not enough for our MPs to simply read out a message in the in Parliament that Loktak lake is dying or our mountains are getting barren, unless all they are interested is melodrama and some words of pity and consolation. They will have to be more imaginative and also do more homework. If they come out with blueprints of action, specifying the estimated costs as well as fund sources which can be tapped for this, and then push for these blueprints to be accepted, the proposals would rise above sentimentality and become actionable. This unfortunately is what has been missing, and MPs seem more interested in getting the opportunity to read out these statements in the Parliament so they can come back home and claim these as great achievements in the local media.

The philosophy behind CSR is, corporation depend on the society’s generosity for their sustenance and profits, therefore it is only right for them to give back a share of their profits to the societies which make their existence possible. If not, their relationship with the society would acquire an exploitative dynamic. Indeed, many well-known companies had begun exercising their CSR responsibilities on their own, donating schools, hospitals etc., but after 2013 companies of a certain level of profitability have to register and contribution towards a consolidate CSR fund mandatorily in India. Not every company in India comes under CSR and small companies with very limited earnings are not obliged to spend on CSR. But CSR has become mandatory through the provisions under Section 135 of the Companies Act, 2013 for every company, private limited or public limited, and has a net worth of Rs. 500 crore or more, or a turnover of Rs. 1,000 crore or more, or a net profit of Rs. 5 crore or more during any financial year. These companies have to spend a minimum of 2% of the average net profits they have made during the three immediately preceding financial years. The CSR law became operational under the Companies Act from April 1, 2014. CSR fund is public money and it can only be used for larger public good and welfare and not for any individual’s benefit. Companies have also to conduct their CSR-related activities in accordance with clear official guidelines. According to the rule, every company must have a CSR committee. This committee and the Board of the company will decide which activities to take up, when and in which locations. Most companies conduct these activities in the regions where they operate.

According to information available, The Companies Act prescribes the kind of social activities, which come under the purview of CSR. This list is included in the 7th schedule of the rule. They are:

  • Protection of national heritage, art and culture, including buildings and sites and artworks of historical importance.
  • Promotion and development of traditional arts and handicrafts.
  • Establishment of public libraries.
  • Establishment of orphanages and hostels, construction of buildings for them, their maintenance and operation.
  • Establishment of old age home, construction of buildings for them, their maintenance and operation.
  • Establishment of day care centres, construction of buildings for them, their maintenance and operation.
  • Setting up of houses and hostels for women.
  • Training to promote rural sports, nationally recognized sports, Olympic Games and Paralympic Games.
  • Promoting education, including special education and employment enhancing vocational skills especially among children, women, elderly and Persons with Disabilities (PwDs) and livelihood enhancement projects.
  • Funding for technology incubators located in educational institutions recognized by the Central Government.
  • Activities to provide safe drinking water.
  • Activities to maintain soil, air and water quality.
  • Conservation of natural resources.
  • Ensuring ecological balance.
  • Conservation of flora, fauna, animal welfare, agricultural forestry.
  • Rural Development Projects.
  • Livelihood related projects.
  • Promoting health and hygiene.
  • Working for socially and economically backward groups.
  • Interventions for the benefit of the widows of war martyrs, and their dependents.
                • (List courtesy: official website)

Surely these are areas of development activities the state government can directly engage in or else partner with approved NGOs and autonomous institutions for execution. The Government of Manipur, like most other Northeast states, is always fund starved, and it will do well for it to explore this area more closely. Corporations which have a big presence in the state, such as those in automobiles, baby food, airlines, banks etc., would all be mandated to contribute to the CSR fund, and they should be where the state should focus on. They would in any case have to contribute the money to the consolidated fund, so why not persuade them to spend it in Manipur. Indigo for instance began their business in the Northeast sector. Their first introductory flight route was Delhi to Imphal and back via Guwahati. They surely would have a soft corner for the state. Or the National Hydro-Electric Power Corporation, NHPC, which owns the Loktak Project since its inception four decades ago could also be persuaded to spend more than the Rs. 3.71 crore they spent in the state last financial year from their CSR due.

There is one more interesting fact about the genesis of the CSR outlook in India and again arguably the spark for this came from the Northeast, in particular Assam, in the 1990s. These were heady days of unprecedented social turmoil in the state with the United Liberation Front of Asom, ULFA, at its peak of power and they began targeting companies from outside the state but with their primary businesses in Assam, such as the tea gardens, ONGC and Oil India etc., charging them of draining the state of its resources without giving back anything to it. Many of them were even asked to shut down and leave the state. To buy their own peace, and probably also realising their own mistake, they began investing in various social welfare schemes, such as building schools, dispensaries etc. This practice, in the years ahead came to be institutionalised, and probably also came to be the foundation of the idea of India’s CSR law. The lesson is, for any business to prosper and run smoothly, the society in which they function has to be taken into confidence and made stakeholders.

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