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NEW DELHI : Businesses spent less than half on charity in 2019-20 than they did in the year before, official data showed, suggesting that the economic downturn is beginning to tell on how companies give back to the community. India Inc. spent a little over 7,800 crore in FY20 against 18,655 crore in the year before.

Corporate social responsibility (CSR) spending reflects charitable activities by businesses on health, fighting ills such as hunger, poverty and malnutrition, and contributing to education and livelihood.

Data available with the corporate affairs ministry showed that 248 entities, including large technology, automobile and food companies, spent less than the required amount, while 98 companies comprising major cement, insurance and pharma companies spent nothing. Spending on health, differently abled and livelihood more than halved in FY20 to 3,582 crore. The share of state-owned companies in overall CSR spending, which was at 20% in FY19, came down to about 6% in FY20.

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To be sure, some data may be incomplete, though it is almost a year after the close of FY20. Companies are required to file their annual returns within six months from the end of the financial year and, after that, CSR-related data is to be filed with the government within one month—that is by the end of October. As part of the pandemic response, the government had given an additional three months up to December-end for companies to file their annual returns for the last fiscal year. So, CSR spending details had to be filed by January.

But to boost CSR activities this fiscal year despite the recession-induced pressure on corporate profits, the ministry last month encouraged companies to spend more than their mandated CSR obligations. The credit for the extra spending this year can be set off against the spending obligation in future years, as per the amendments to CSR rules brought in last month.

“The overall stress and liquidity constraints have made companies conservative in spending, given that CSR funds are not maintained separately. Therefore, funds for CSR activities are not spared from the overall liquidity crunch faced by firms. The latest amendment to CSR rules brought out on 22 January mandates that from now on, unspent CSR funds have to be parked in a designated fund," said Pavan Kumar Vijay, founder of consulting firm Corporate Professionals Group.

The government also introduced a monetary penalty for breaches, which means defaults in CSR obligation cannot be explained away from now on. Accordingly, defaulting companies are liable to a penalty of at least 1 crore, while each defaulting officer is liable to at least 2 lakh in penalty. Large CSR spenders must carry out an independent impact assessment of their activities.

Besides, the ministry also follows the carrot-and-stick approach for disclosing the names of top CSR spenders and defaulters.

CSR helps businesses to build goodwill among the people who are the most affected or displaced by business operations and often complement government welfare programmes.

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