Education, health care, rural development projects and environment sustainability have emerged as the areas where the companies end up spending the most as part of their Corporate Social Responsibility (CSR) projects.
Similarly, states like Maharashtra, Karnataka, Gujarat and Delhi received the maximum share of CSR spending with as much as ₹18,472 tcrore being spent in 2019-20 and ₹17,642 crore being spent by the companies on CSR activities between 2020-21, the data available till the end of September this year says.
While ₹4,777 crore were spent on education projects in 2019-20, ₹4,004 crore were spent in 2020-21 in the same area. The effect of Covid pandemic were clearly visible in the CSR spending in 2020-21 as the health care sector saw over ₹5,000 crore being spent on CSR in 2020-21 as compared to ₹3,523 crore that were spent in 2019-20.
As per the data made available to the government, rural Development sector saw ₹1,951 crore being spent in 2019-20 as compared to ₹1,518 crore being spent in 2020-21. Environment sustainability had CSR projects worth ₹1,178 crore in 2019-20 and ₹73600 crore in 2020-21.
The data says that while Maharashtra saw ₹2,105 crore CSR projects in 2019-20, in 2020-21 the CSR spending had gone down to ₹1,885 crore. Similarly, Karnataka had a CSR spending of ₹8250 crore in 2019-20 it came down to ₹6,220 crore in 2020-21. Andhra Pradesh saw ₹5,480 and ₹5,110 crore, Gujarat ₹463 and ₹789 and Delhi ₹430 and ₹223 thousand crore spendings in 2019-20 and 2020-21 respectively.
The broad framework for Corporate Social Responsibility (CSR) has been provided under Section 135 of the Companies Act, 2013 (‘Act’), Schedule VII of the Act and Companies (CSR Policy) Rules, 2014. The CSR framework is disclosure based and CSR mandated companies are required to file details of CSR activities annually in the MCA21 registry. All data related to CSR expenditure filed by companies in MCA21 registry is available in public domain at www.csr.gov.in. On the basis of annual filings made by companies in the MCA 21 registry, development Sector-wise CSR spent by top 500 companies during last two Financial Years (FY) i.e. 2019-20 and 2020-21 in different activities.
As per the act, companies having a net worth of ₹1,000 crore and a net profit of ₹5 crore have to spend average two per cent of their net profit on CSR activities.
Schedule VII of the Act indicates the eligible list of activities that can be undertaken by the companies as CSR. The Ministry vide General Circular no. 21/2014 dated 18th June, 2014 and 14/2021 dated 25th August, 2021 had clarified that items mentioned in Schedule VII are broad based and can be interpreted liberally.
Under the Act, CSR is a Board driven process and the Board of the company is empowered to plan, decide, execute and monitor the CSR activities based on the recommendations of its CSR Committee. The CSR mandated companies can undertake any of the activities mentioned in Schedule VII subject to fulfilment of provisions as contained in the Act and Companies (CSR Policy) Rules, 2014. The Government does not issue any direction to the companies to spend in any particular geographical area or activity.
Through the Companies (Amendment) Acts, 2019 and 2020, certain amendments to Section 135 of the Act have been made to provide for treatment of unspent CSR amount on the basis of nature of the project. In case of an ongoing project, the company is required to transfer the unspent amount to a special account of the company i.e ‘Unspent CSR Account’, within 30 days from the end of financial year and spend the same in pursuance of its CSR policy within the next three financial years from the date of such transfer.
After lapse of three financial years, the amount remaining unspent, if any, is required to be transferred to any Fund mentioned in Schedule VII of the Act. In case of other than an ongoing project, the company is required to transfer the unspent CSR amount to any Fund mentioned in Schedule VII of the Act within a period of six months from the end of the financial year. The Government monitors the compliance of CSR provisions through the disclosures made by the companies in MCA21 registry. Whenever any violation of CSR provisions is reported, action against such non-compliant Companies is initiated as per provisions of the Act after due examination of records and following due process of law.