Lok Sabha Question No. 2916 (UNSTARRED), answered on 2018-08-03
Subject: Review of CSR Policy
Ministry: CORPORATE AFFAIRS
Asked by: SRIRAM MALYADRI, ANIRUDHAN SAMPATH

## GOVERNMENT OF INDIA

## MINISTRY OF CORPORATE AFFAIRS

## LOK SABHA

## UNSTARRED QUESTION NO. 2916 ANSWERED ON FRIDAY THE 3 RD  AUGUST, 2018/ SHRAVANA 12, 1940 (SAKA)

## REVIEW OF CSR POLICY QUESTION

2916.  SHRI MALYADRI SRIRAM:

DR. A. SAMPATH:

Will the Minister of CORPORATE AFFAIRS be pleased to state:

कारपोरेट कार्य मंत्री

- (a) whether the Government has decided to have a thorough review of the policy of Corporate  Social  Responsibility  (CSR)  of  private  sector/corporates  and  if  so,  the details thereof and the outcome thereof;
- (b)  whether  the  Baijal  committee's  report  on  CSR  has  not  been  implemented  on  a nation-wide basis and if so, the details thereof;
- (c) whether the CSR policy has been a failure with regard to social welfare policies and objectives and if so, the details thereof;
- (d) the total CSR funds spent in 2016-2017 across the country; and
- (e) whether the corporates have been diverting the CSR funds to the benefit of their own companies and if so, the details thereof along with the steps being taken by the Government for making the scheme more effective and result oriented?

## ANSWER

THE MINISTER OF STATE FOR LAW AND JUSTICE                (SHRI P. P. CHAUDHARY) AND CORPORATE AFFAIRS

विधि और न्र्ार् एिं कारपोरेट

( श्री पी॰ पी॰ चौिरी )

कार्य मंत्रालर् में राज्र् मंत्री

- (a) & (b): Every company having net worth of Rs. 500 crore or more or turnover of Rs. 1000  crore  or  more  or  net  profit  of  Rs.  5  crore  or  more  during  the  immediately preceding financial year shall ensure that company spends, in every financial year, at  least  2%  of  the  average  net  profits  of  the  company  made  during  the  three immediately  financial  years  on  Corporate  Social  Responsibility  (CSR)  activities  in areas  or  subjects  specified  in  Schedule  VII  of  the  Companies  Act,  2013  ('Act'). Further, every such

company will have a CSR Committee which will (i) formulate and recommend to the Board  a  CSR  policy  which  shall  indicate  the  activities  to  be  undertaken  by  the company (ii) recommend the amount of expenditure to be incurred on such activities and  (iii)  monitor  the  CSR  policy  from  time  to  time.  Further,  the  Board  of  such company  shall  approve  the  CSR  policy  recommended  by  the  CSR  Committee  and ensure  that  activities  included  in  the  CSR  policy  are  undertaken  by  the  company. Presently,  there  is  no  proposal  before  the  Government  to  review  the  existing provisions of CSR and Schedule VII of the Act.

A  High  Level  Committee  (HLC)  was  set  up  by  the  Ministry  of  Corporate  Affairs  to suggest measures for monitoring the progress of implementation of CSR policies by companies.  This  Committee  submitted  its  report  on  22nd  September,  2015.  The report has been placed in the public domain on the Ministry's website (www.mca.gov.in).

Major recommendations of the Committee include, inter-alia, the following:

-  It would be desirable to conduct a review of the CSR provision of the Act after three years.
-  Ceiling on administrative overhead cost should be increased from 5% to not more than 10% of the CSR expenditure.
-  Definition of the term 'net profit' used under the Act and Rules needs to be clarified.
-  Re-examination of reference to the 'any financial year' in Section 135 (1) of the Act with a view to making necessary amendment(s) either in Section 135 (1) or in the relevant rule.
-  Board and the CSR Committee should manage and monitor their CSR at their level.
-  Government  should  have  no  role  to  play  in  engaging  external  experts  in monitoring the quality and efficiency of CSR expenditure of Companies.
-  The  unspent  balance  out  of  the  CSR  fund  should  be  allowed  to  be  carried forward with a sunset clause of five years, after which the unspent balance should be transferred to one of the funds listed in Schedule VII.
-  An omnibus clause may be included in Schedule VII of the Act to suggest that CSR activities must be for larger public good and for any activity that serves public  purpose  and  /or  promotes  the  well-being  of  the  people,  with  special attention to the needs of underprivileged.

-  All  information  related  to  implementation  of  CSR  by  companies  including amount spent, activity undertaken, geographical area covered as reported by companies  should  be  compiled  by  Ministry  of  Corporate  Affairs  and  this should be placed in public domain.

The Ministry has taken inter-alia the following actions on the recommendation of the HLC:-

- (i) Report of the HLC was referred to Company Law Committee (CLC).
- (ii) Some of the recommendations such as definition of 'any financial year', definition of 'Net Profit' for the purpose of Section 135, were agreed to by the CLC  and  necessary  amendments  have  been  enacted  by  way  of  Companies (Amendment) Act, 2017.
- (iii) A set of Frequently Asked Questions in the form of Clarificatory Circular have  been  issued  by  the  Ministry  on  12th  January,  2016  and  the  same  is placed in the public domain (www.mca.nic.in).
- (iv) Information relating  to  CSR  expenditure  by  companies  has  been collated and compiled.

MCA launched a web portal National CSR Portal (www.csr.gov.in) for making public the information provided by companies in their filings on MCA21.

- (c)  to  (e):  Whenever,  violation  of  CSR  provisions  is  reported,  the  Registrar  of Companies initiates action against such non-compliant companies after due examination of records. For the FY 2014-15, prosecution against 254 companies was sanctioned, out of which 33 companies have filed applications for compounding. In addition to this, the Ministry has established a Centralized Scrutiny and Prosecution Mechanism  (CSPM)  in  April,  2018  from  FY  2015-16  onwards  on  pilot  basis  for enforcement of CSR provisions. CSPM has been tasked to start with examination of records  of  top  1,000  companies  mandated  to  spend  on  CSR.  Based  on  scrutiny, preliminary  notices  have  been  issued  to  272  companies.  The  details  of  state-wise CSR expenditure for the financial year 2016-17 is at Annexure.

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## ANNEXURE

## ANNEXURE REFERRED TO IN REPLY TO LOK SABHA UNSTARRED QUESTION NO. 2916 STATE/UT-WISE CSR EXPENDITURE DURING FY 2016-17

## CSR Expenditure (in Rs. Crores)

| Sl. No.   | State/ UT                 | 2016-17*   |
|-----------|---------------------------|------------|
| 1         | Andaman & Nicobar Islands | 0.07       |
| 2         | Andhra Pradesh            | 101.69     |
| 3         | Arunachal Pradesh         | 7.98       |
| 4         | Assam                     | 38.28      |
| 5         | Bihar                     | 36.90      |
| 6         | Chandigarh                | 4.17       |
| 7         | Chhattisgarh              | 14.85      |
| 8         | Dadar & Nagar Haveli      | 1.65       |
| 9         | Daman & Diu               | 0.83       |
| 10        | Delhi                     | 229.87     |
| 11        | Goa                       | 10.54      |
| 12        | Gujarat                   | 152.04     |
| 13        | Haryana                   | 107.87     |
| 14        | Himachal Pradesh          | 10.57      |
| 15        | Jammu & Kashmir           | 27.83      |
| 16        | Jharkhand                 | 24.24      |
| 17        | Karnataka                 | 202.71     |
| 18        | Kerala                    | 50.94      |
| 19        | Lakshadweep               | 0.00       |
| 20        | Madhya Pradesh            | 213.48     |
| 21        | Maharashtra               | 702.37     |
| 22        | Manipur                   | 6.03       |
| 23        | Meghalaya                 | 2.99       |
| 24        | Mizoram                   | 0.08       |
| 25        | Nagaland                  | 0.45       |
| 26        | Odisha                    | 191.43     |
| 27        | Pondicherry               | 3.71       |
| 28        | Punjab                    | 20.17      |
| 29        | Rajasthan                 | 84.99      |
| 30        | Sikkim                    | 2.12       |
| 31        | Tamil Nadu                | 202.53     |
| 32        | Telangana                 | 64.56      |
| 33        | Tripura                   | 0.60       |
| 34        | Uttar Pradesh             | 120.34     |
| 35        | Uttarakhand               | 30.74      |
| 36        | West Bengal               | 121.12     |
| 37        | Pan India**               | 1,928.26   |
|           | Grand Total               | 4,719.00   |

**  Companies either did not specify  the names of States or indicated  more than one State where projects were undertaken.

- *****