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PSUs to double CSR contribution to 1%

Top earning Central Public Sector Enterprises will have to double their minimum expenditure on corporate social responsibility (CSR) from beginning of 2013-14 fiscal, as per the new norms of the Department of Public Enterprises.

“CPSEs earning net profit of over Rs 500 crore will have to raise their minimum expenditure on CSR to one percent from the next fiscal from existing 0.5 per cent,” Department of Public Enterprises (DPE) secretary O P Rawat informed. Under the new norms, PSUs with net profit of over Rs 500 crore in the previous year will have to earmark one per cent of it from the current level of 0.5 per cent for carrying out such activities. But the upper limit of two per cent remains unchanged.

As per the existing norms, CPSEs whose net profit is Rs 500 crore and above in the previous year, their CSR spending ranges between 0.5 to two per cent of their profits.

However, the new guidelines related to allocation of budget for CSR will be enforced till the time new companies law comes into effect and once it is implemented the quantum of earmarking funds for CSR would change for all companies, including PSUs.

“The suggested slabs of budgetary allocation for CSR would stand modified as and when the new company law brings in provisions in this regard, which will need to be followed by all companies including the CPSEs,” the revised norms stated. Under the present system, there is also a provision of a minimum expenditure of Rs 3 crore on CSR activities for CPSEs, having a net profit of Rs 100-500 crore.

“Under the revised norms, the minimum requirement of Rs 3 crore has been removed as this created anomalous situation vis-a-vis CPSEs in the higher slab of over Rs 500 crore net profit,” Rawat said. Besides, CSR and sustainable development would be combined into one set of guidelines. At present, CSR and sustainable development are two separate subjects and are dealt differently for the purpose of Memorandum of Understanding (MoU) evaluation.

Once the revised guidelines would be in place, the emphasis of CSR and sustainability would be on capacity building, inclusive socio-economic growth, environment protection, green and energy efficient technologies promotion, backward regions development and upliftment of under- privileged people. “We have moved from financial CSR to all encompassing business conduct guidelines,” Rawat said. However, the percentage of earmarking funds remains the same for PSUs having net profit less of than Rs 100 crore. These companies are required to earmark three per cent of their income for undertaking such activities. To address the issue of PSUs not fully spending the allocated funds earmarked for CSR, the government has made it mandatory for these companies to disclose the reasons for the same. As per the new norms, the unspent amount of the budget allocated for CSR and sustainability activities for a year will have to be spent within the next two financial years, failing which, it would be transferred to a “Sustainability Fund” to be created separately for CSR and sustainability activities. Besides, the revised norms underscore the need for the top management of PSUs to be actively involved in carrying forward the agenda of CSR and sustainability.

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