India Inc breathed a sigh of relief when the high-level committee on CSR (corporate social responsibility) — appointed in September 2018 — recommended doing away with the penal provision of imprisonment for non-compliance with CSR norms. This had followed the recent amendments to the Companies Act 2013 treating CSR non-compliance as a criminal offence, and declaring stiff penalties and a jail term for violations.
So, CSR spends will continue to be mandatory, but may only be treated as civil offence in the case of non-compliance.
But all the noise around CSR norms makes you wonder, how big is the problem of non-compliance really? Companies that have a net worth of at least ₹500 crore or a turnover of ₹1,000 crore or a net profit of ₹5 crore have been required to spend 2 per cent of their net profits on CSR programmes compulsorily since 2014-15.
An analysis of numbers from nseinfobase.com (of Prime Database) since 2014-15 suggests that India Inc continues to fall short of the mandated CSR spends. Even after five years of the mandate coming into play, many companies appear reluctant to spend on CSR activities.
Thirty-two of the Nifty 50 companies for which data is available have reported a shortfall of ₹279 crore in 2018-19, against the mandated CSR spend of ₹3,782 crore for the year.
The companies in the Nifty basket that have reported shortfalls include big names — TCS, Kotak Mahindra Bank, YES Bank, ICICI Bank and HCL Technologies, according to Prime Database.
While TCS was mandated to spend ₹542 crore for 2018-19, it ended up spending ₹434 crore. Last year, too, the company had a shortfall of ₹97 crore (against the mandated amount of ₹400 crore). Similarly, ICICI Bank was required to spend ₹118.96 crore on CSR in 2018-19 but spent ₹92.2 crore.
Among the 1,000-odd NSE listed companies, data is available for 340 companies, which have seen a shortfall in CSR spends of nearly ₹489 crore for 2018-19. The required CSR spend from these companies for the year was ₹5,891.65 crore.
While at the aggregate level, India Inc continues to report shortfalls, compliance over the years has improved. In fact, the percentage of shortfall against the mandated CSR spend has been falling over the years.
In 2014-15, the shortfall in CSR spends was about 30 per cent of the mandated amount. In 2017-18, this declined to about 17 per cent. For 2018-19, data is available for only 340 companies, where the proportion of shortfall is about 8 per cent.
For Nifty 50 companies, too, the trend in CSR spend has been positive, with the percentage of gap between actual and mandated CSR spend narrowing from about 25 per cent in 2014-15 to about 7 per cent in 2018-19.
From just 11 companies in 2014-15 (of the 32 companies for which 2018-19 data is available), 25 companies in 2018-19 have complied with the mandated CSR spend (zero shortfall).
A healthy mix of good and bad spenders has limited the overall shortfall for Nifty companies. A few companies have spent more than the mandated amount in 2018-19. These include Tata Steel, Vedanta, Axis Bank, Ultra Tech and Wipro.