New Delhi :In a disappointing start to the much-touted CSR regime, a vast majority of the country’s top blue-chip companies have failed to spend the minimum 2 per cent of profits on social responsibility activities in the first year by missing the target by one-third on an average.
Collectively, the 30 Sensex companies are estimated to have spent about Rs 3,500 crore on CSR initiatives during the 2014-15 fiscal, when they were required to spend nearly Rs 5,000 crore on such activities under the new Companies Act.
Together, they are estimated to have clocked a three-year-average net profit of Rs 2.5 lakh crore, of which they were required to spend 2 per cent on Corporate Social Responsibility (CSR).
Making the scorecard even worse, just seven of them could meet this two per cent threshold in time. These firms include Mukesh Ambani-led Reliance Industries, ITC, Mahindra and Mahindra, Wipro, Hindustan Unilever, Tata Steel and Coal India, while Infosys also managed to meet the target although after a delay by a few days for a small amount of Rs 3 crore.
Interestingly, quite a few companies have also tried to defend their failure to meet the threshold with reasons like ‘money already having been earmarked’ and ‘delays in getting requisite approvals for spending the prescribed amounts’.
Quite a few public sector companies have also failed to meet the target.
The companies whose actual CSR spending was less than 2 per cent during the year included HDFC Bank, ICICI Bank, Axis Bank, SBI, Dr Reddy’s, HDFC, Bajaj Auto, Bharti Airtel, Hero Motocorp, Hindalco, Larsen and Toubro, TCS, Lupin, Cipla, Maruti Suzuki, GAIL, NTPC, BHEL and ONGC.
All of them have expressed commitment to the CSR work.
Corporate giant Reliance Industries Ltd (RIL) spent the
the maximum amount (Rs 761 crore) among the Sensex companies on CSR during 2014-15 – the first financial year for which the new law has been in force.
RIL is followed by ONGC in terms of absolute amount at Rs 495 crore, although it could spend only 1.5 per cent of its three-year-average net profit.
There is no penalty as such for missing this threshold, but the company needs to explain the reasons for its failure to spend at least 2 per cent on CSR. The government has set up a six-member panel to suggest steps for improved monitoring of social welfare activities done under the Companies Act.
At least two companies, Vedanta Ltd and Tata Motors, did not have any obligation to meet the CSR threshold as they did not meet the requirement due to losses. The exact figures for Sun Pharma could not be ascertained.
Still, it had spent Rs 25.5 crore (1.3 per cent of its last fiscal profit after tax) in CSR projects and initiatives.
The new law applies to companies with 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 in a financial year.
They are also required to constitute a CSR committee with three or more directors, at least one of whom should be an independent director. If a company fails to spend full or part of the prescribed amount, it needs to explain the shortfall.
Bharti Airtel spent Rs 41.1 crore (0.6 per cent), Hero MotoCorp’s CSR spending was Rs 2.37 crore (0.1 per cent), Hindalco’s was Rs 32.42 crore (1.86 per cent), L&T spent Rs 76.54 crore (1.44 per cent), TCS’s CSR bill was Rs 219 crore (1.5 per cent) and Lupin spent Rs 12.6 crore (0.6 per cent).
Among others, Cipla could spend Rs 13.43 crore (0.8 per cent) and Maruti Suzuki spent Rs 37.25 crore (1.5 per cent).
Among PSUs, NTPC spent only 1.45 per cent (Rs 205.18 crore) and BHEL spent Rs 102.06 crore (1.24 per cent).
Bharti Airtel said, “Being the initial year, the company was in the process of evaluating the focus areas/locations of intervention for CSR activities to cater to the pressing needs of society and deliver optimal impact.”
“As a socially responsible company, your firm is committed to increase its CSR impact and spend over the coming years, with its aim of playing a larger role in India’s sustainable development by embedding wider economic, social and environmental objectives,” the company informed investors in its Annual Report.
Hero MotoCorp said it “has in place a robust plan, monitoring mechanism and enabling infrastructure to ensure that CSR activities initiated by the company are sustainable and truly beneficial to the society in the long run.”
“However, the formal initiatives on CSR could start only in the later part of the financial year after the approval of CSR policy by the Board. While the work was initiated only on few programmes, pre-work activities have been detailed out for most of the initiatives and during 2015-16 your company would see a huge action and corresponding spend on CSR.
“The current financial year will not only see the statutory spending but will also make up the deficiency of 2014-15, wherein the ground work has taken place,” it added.