Commit CSR Spending to J&K

BILAL HUSSAIN

With the India Inc. gearing up for mandatory Corporate Social Responsibility (CSR) regulated by Ministry of Corporate Affairs, the nonexistence of corporates in Jammu and Kashmir makes it lackluster here.  Like other developmental phenomenon in rest of India, Kashmir will hardly get its share and benefited from the CSR activities.

It is estimated that a massive amount of about two billion dollars will be involved in the CSR spending. CSR spending is expected to reflect values of a corporate while fulfilling the societal and environmental requirements.

In late February 2014, the Ministry of Corporate Affairs, Government of India notified rules under the Section 135 of Companies Act 2013 for CSR spending which will be effective from 1st April 2014. Under the current legislation, certain classes of companies have to shell out at least 2 per cent of their three year annual average net profit towards social welfare activities.

As per the provisions of section 135, a company with turnover of INR 1000 crore or more or a net-worth of INR 500 crore or more or net profit of INR 5 crore or more in any financial year shall constitute a CSR Committee and would be required to spend at least 2 per cent of their average net profits of the past three years on CSR activities. If for any reason a company is unable to do so, they would be required to explain the reason for that. An annual report on CSR activities must be included in the Board Report of a company spending on CSR.

According to an estimate by the Ministry of Corporate Affairs, companies could end up spending up to INR 30,000 crore on CSR activities following the new recommendations. While, Ernst & Young, the audit and advisory company, estimates that the law would cover about 3,000 companies in India and about $2 billion of expenditures on CSR activities. Even at that rough estimate, the BSE-500 companies would have to shell out around INR 8,000 crore.

The type of CSR programs a company should focus on could be based on its core competencies and institutional capacity, and its ability to excel in either philanthropic activities or transformative ecosystem CSR efforts.

Given the scenario, the corporates that fall in this ambit should take due care of left out geographies while drafting the CSR strategy and achieve all inclusive growth and sustainability across India.

The top executives in the corporates have to understand that success is difficult to evaluate, especially when corporates try to connect the CSR initiatives with company’s profit-driven goals. The various decision makers initiating CSR programs will face these difficulties while trying to make that connection, because attempting to measure the business advantage of charitable endeavors would decline their authenticity. However, the corporates in India have to realize that CSR initiatives may be more important than quantitative measurements of their effectiveness.

Mention to be made, there are only few global humanitarian aid organizations operating in Kashmir: Actionaid International, Médecins Sans Frontières [MSF], Handicap International [HI], Save The Children [STC], International Committee of the Red Cross [ICRC] to name a few. Coupled with not so good financial wellbeing of developmental organizations here worsens the situation.

A regulatory rider by Ministry of Corporate Affairs for equitable distribution of CSR spending in terms of geographies would have ensured all-encompassing support to ignored regions like: Jammu and Kashmir. However, in the prevailing legislation legally none of the companies is bound to have CSR spending as per geographies. Now, the onus is on top executives of these corporates to see that Kashmir gets its due share as the state is considered as consumer market for many of their products and services.