The Corporate Social Responsibility (CSR) spent by businesses in India has declines over past three-four years despite a sharp jump in the prescribed CSR amount in the financial year 2015-18.
According to a government report, the overall CSR spend on part of companies liable under CSR Act 2013, declined to Rs 13,326 crore in financial year 2017-18 as compared to Rs 14503 crore in the 2015-16.
Ironically, the prescribed CSR amount in the same period witnessed a jump of about 30 % over the three years. The prescribed CSR amount for 20117-18 stood at Rs 23247 crore as compared to Rs 17044 crore in 2015-16.
‘Prescribed amount’ of a company for CSR refers to 2% of the Average Net Profit of the company made during the three immediately preceding financial years as per subsection (5) of Section 135 of the Act. In case a company is liable for CSR obligation and is not reporting on CSR, 2% of the Average Profit Before Tax (PBT) for the three immediately preceding years has been taken as ‘prescribed amount’ for that company.
As per the Act, companies with a net worth of Rs 500 crore or more, or a turnover of Rs 1000 crore or more, or a net profit of Rs 5 crore or more in the immediately preceding financial year are required to spend 2 percent of their average net profit of the preceding three years on CSR.
CSR obligation on rise; spend on fall
The total CSR expenditure declined in the year 2016-17 and further dipped by 6.9% in the year 2017-18. On the other hand, the number of companies which carry CSR obligation steadily increased from 18,290 in the year 2015-16, to 19,532 in the year 2016-17 and 21,337 in the year 2017-18.
The basic reason for lower CSR spent is attributed to the non-compliance of CSR Act by the companies. While the CSR obligation has been on a steady rise with more and more companies falling in the ambit of CSR Act 2013, the corporates have been faltering on the CSR compliance.
In the FY 2015-16, the compliance percentage which was at 85% in 2015-16 (see table) fell to 72% in 2016-17. In the financial year 2017-18, it further fell to a poor 57%.
Section 135 of the Act, Schedule VII and Companies (CSR) Policy Rules, 2014 seeks to make business involvement in CSR and make it socially, economically and environmentally responsible.
