Cement, Energy & Environment

, Corporate Social Responsibility NATIONAL BODY TO MONITOR CSR FUNDS, PfU'IJI=r.T E)(l=f"IITION I IKI=LY An independent mechanism may be put in place to ensure fair, transparent and full use of the funds earmarked by India Inc for Corporate Social Responsibility (CSR) activities. New corporate affairs minister Sachin Pilot has proposed creation of an entity -likely a special purpose vehicle (SPV) - for monitoring CSR funds use besides ensuring that corporales don't fail in timely execution of CSR projects. Speaking to FE, the minister said the proposed body would be independent of government intervention and run by corporales/industry bodies, with a wide representation to ensure its neutrality. Pilot has invited industry bodies like the Confederation of Indian Industry, Federation of Indian Chambers of Commerce and Industry and top corporate executives to discuss the matter on December 4. The Companies Bill, 2011 , slated for consideration and passing by Parliament in the current session, makes it mandatory for profitable government and private companies to allocate 2 per cent of their average profits accrued in the preceding three financial years on CSR programmes. According to estimates, the annual CSR funds corpus could be around Rs. 10,000 crore (around $2 billion) or more. As per the ministry' plan , there would also be a national-level CSR body to monitor the activities of the proposed SPY/ financial entity. Its mandate will be to ensure that the funds earmarked for CSR projects are fully used up on the designated activities. Sources said the proposed SPY/financial entity would have legal status and won't aim to make profits. It will need to maintain record books and financial statements and will have to furnish audited financial statements to the Registrar of Companies. Among others, there is also a proposal to allow the corporate sector to work with a corporate partner or a non-governmental organization to execute their CSR initiatives with the approval of the national-level CSR body. Pilot clarified that the government has no intention of controlling the proposed SPY or the financial entity. "The idea is to keep the CSR funds outside of the government's intervention. Right now, it is a proposal and we are meeting companies and various industry bodies for their feedback and suggestions. The idea is to ensure that the funds are spent on substantial CSR activities," Pilot said. Stating that his first priority was to get the Companies Bill passed by Parliament, the minister said: "We can always make amendments in the law once it is passed. Of course, this will be done with the active participation and feed back of the corporate sector." The move to float an SPV for use of CSR funds takes its cue from similar mechanisms in countries like France, Mauritius and Indonesia, among others. In Mauritius, for example, a company or a group of companies with CSR contribution above a threshold value can use an Spy for the implementation of its CSR in itiatives provided it meets certain laid-down riders. As per the norms, the administrative costs of the SPY should not exceed 15 per cent of the total expenditure on projects for a CSR fund of up to 20 million Mauritian rupees. Then the SPV has to work and report to a national CSR committee. Based on the financial results posted by listed companies in 2010-11 , a report by SMC Global Securities had said that India Inc would need to collectively shell out around Rs.9,000 crore as around 1,230 companies had collectively posted profits of Rs. 4.38 lakh core. In FY12, state-owned oil companies, led by ONGC and Indian Oil Corporation, hired over 4,200 people and spent around Rs .385 crore on CSR initiatives , according to a statement from the oil ministry in October. The move to float an Spy comes from the fact that there has been a mismatch between the CSR funds generated and used up every year. An analysis of CSR funds of leading PSUs shows this mismatch. Sample this: In the last three financial years 2009-10 , 2010 - 11 and 201 1 - 12. Coal India allocated Rs. 860 crore towards CSR activities but used only Rs.230 crore. 42