Corporate Social Responsibility rules soon, will include 10 major areas

Feb 22,2014

NEW DELHI: The government has identified 10 major areas including education, gender equality, environment, national heritage and the Prime minister Relief fund where India Inc can spend to claim credit for the mandatory 2% Corporate Social Responsibility (CSR) expenditure.

Under the new Companies Act, mid and large companies have to spend 2% of their three-year annual average net profit on CSR activities. The government expects a significant step up in spending on CSR projects by companies.

The activities which can be included by companies in their CSR policies include: eradicating hunger, poverty, malnutrition and promoting preventive healthcare, promoting sanitation and availability of safe drinking water, promoting education, promoting gender equality, ensuring environmental sustainability, protection of national heritage.

Those spending for the benefit of armed forces veterans, war widows and their dependents would be eligible to cover the expenses under CSR spending rules.

Under gender equality activities related to empowering women, setting up homes and hostels for women and orphans, setting up old age homes, day-care centres and similar facilities for senior citizens and projects on reducing inequalities faced by socially and economically backward groups have been included.

Spending on training to promote rural and nationally recognized para-olympic and Olympic sports would also qualify for credit under the CSR rules. Rural development projects and contributions or funds to technology incubators located within academic institutions and approved by the government would also be approved under this category.

Officials said they expect the rules to be notified soon, maybe within a few days, after the law ministry approves the list. The rules were finalized after the corporate affairs ministry examined over one lakh suggestions from various stakeholders. While the rules do not elaborate on the sub-categories under rural development projects, officials said they expect several projects to be covered under the category for CSR spending.

But a clause which allowed company boards to identify any activity for CSR spending has been questioned by the law ministry which has delayed the notification of the much awaited rules. "They (the law ministry) have some reservations. It is a purely legal issue. They don't have any questions about the substance of the clause," said an official. The law stipulates the Centre to define CSR activities and does not allow further delegation of these powers to a company board.

Corporate affairs minister Sachin Pilot had TOI last year that the essence of the bill is self-reporting and self-disclosures and there is no intention on the part of the government to create an inspector raj. "This is the company's money. They have full freedom to choose how they want to spend that money," Pilot had said.