Tatsat Chronicle Magazine

Southward Bound

Interim data reveals that CSR spending for 2021 has reduced by more than 50 percent from the previous year to a shade over ₹7,800 crore with a substantial chunk going to the PM CARES Fund. As a result, work in some of the most critical areas of the development sector has taken a hit, and will continue to be starved of funding in years to come
June 16, 2021
Cash crunch: Health awareness programmes will bear the brunt in the near future due to the drop in CSR spending

Economic upheavals unleashed by Covid-19 have severely impacted corporate social responsibility (CSR) spends. Analysis of available data reveals that CSR spending in 2020 dropped by almost half compared to 2019. The silver lining, however, is that it spawned a new wave of thinking among corporate heavyweights, who, besides working on business continuity in difficult times, pooled resources for the general public good. Under the CSR head, strictly speaking, as many as 248 entities, including large corporations in the auto, FMCG and technology sectors, spent well below the expected amounts, while 98 percent of companies in the pharma, insurance and cement space contributed nothing towards CSR, according to a report on Money Control. The overall share of contribution by public sector companies towards CSR dropped to six percent in 2020, compared to 20 percent in 2019. The total spending in 2020 was a little over ₹7,800 crore; approximately a 50 percent drop compared to the previous year.

No information : The PM CARES Fund has been shrouded in controversy

On March 24, 2020, when Prime Minister Narendra Modi, in his 8 pm televised address to the nation, announced a countrywide lockdown from midnight, it caught everyone unaware. All economic activity, barring some essential services, came to a grinding halt. The corporate sector was not prepared for such drastic action at such short notice. Overnight the factories, large and small manufacturing units, service centres etc., across the country were forced to shut shop, sending huge shockwaves through an already fragile economy. As it turned out, India implemented the world’s most stringent lockdown that lasted for more than 60 days and resulted in severe economic contraction. The true extent of the havoc caused by the abrupt lockdown was revealed by the economic data of the first quarter of 2020-21: the national economy contracted by a massive –23.9 percent, registering the steepest fall among large global economies. Once the initial shock settled, the corporate sector slowly adjusted to the new normal. The services sector reoriented itself by switching to work-from-home, even as manufacturing remained mostly suspended. In this scenario, some of the corporate houses partnered with NGOs, civil society groups, and individuals to provide relief to the most vulnerable and migrants, who trudged back home.

Work stalled: Rural development projects are likely to slow down

It was against this backdrop that Modi announced the setting up of the Prime Minister’s Citizen Assistance and Relief in Emergency Situations Fund or PM CARES Fund. Similar to the Prime Minister’s National Relief Fund (PMNRF), the new fund was exclusively focused on providing pandemic relief. Corporate houses, individuals, public sector undertakings, and government servants were asked to donate to the fund. However, unlike the PMNRF, for which spending figures are publicly available on its website, no information of receivables and spending of PM CARES funds is available in the public domain in a consolidated form. All attempts by activists to seek information about fund utilisation under the Right to Information Act have been repeatedly stonewalled. On March 31, the government declared that donations to PM CARES would get a tax break under Section 80G of the Income Tax Act. This helped to make the fund grow exponentially, but how much money it has collected remains outside any public scrutiny.

In 2019, according to government figures, CSR contribution was ₹17,885 crore, covered all the 28 states and eight Union Territories, 5,223 companies and involved 18,765 projects. This spend was spread over sectors such as education, health, hunger, malnutrition, sports, and poverty alleviation.

Companies such as Reliance Industries, Tata Consultancy Services Ltd, Oil and Natural Gas Corporation Ltd, HDFC Bank Ltd, Indian Oil Corporation, Infosys Ltd, Bharat Petroleum Corporation Limited, Power Grid Corporation of India Ltd, ITC Ltd, and National Thermal Power Corporation Ltd were the top CSR spenders. These companies spent ₹500 to ₹1,000 crore as donations to the PMNRF and areas such as sports, Swachh Bharat, Clean Ganga Fund, and slum development. However, in 2020 this figure dropped to a little over ₹7,800 crore.

Water world: The Clean Ganga Fund received substantial CSR funding

Top states to get CSR funding in 2019 were Maharashtra (₹2,108 crore), followed by Karnataka (₹1,137 crore), Assam (₹737 crore), Tamil Nadu (₹696 crore), Gujarat (₹655 crore), Odisha (₹635 crore), Andhra Pradesh (₹587 crore), Rajasthan (₹544 crore), Delhi (₹412 crore), and Haryana (₹367 crore). Listed companies contributed 22 percent and unlisted 78 percent, respectively.

Three policy changes made due to the pandemic are likely to impact CSR funding patterns in the long run. The first allows spending of CSR funds on Covid-related activities. Apart from contribution to PM CARES, and State Disaster Management Authority, CSR funding can be made towards expenditure incurred on preventive healthcare and sanitation, ex gratia payments to temporary or casual workers over and above daily wages, and on providing quarantine facilities to those affected.

Apart from contribution to PM CARES, and State Disaster Management Authority, CSR funding can be made towards expenditure incurred on preventive healthcare

top-csr-spenderSecond, all donations for Covid-related efforts are eligible for 100 percent tax deduction and third, companies that contribute over and above the minimum prescribed amount may later offset the excess expenditure against the CSR obligation arising in subsequent years, if required.

Hundreds of crores of rupees have been donated to various government funds. According to a report in The Hindu Businessline, India Inc. spent ₹7,537 crore as CSR obligations in two months on Covid-related activities. This included ₹4,316 crore in donations to PM CARES. The remaining ₹3,221 crore was spent on other relief funds, food and ration donations, masks, sanitisers, and protective gear kits. But increased spending on the pandemic resulted in other development work running dry of funds.

An analysis by KPMG, “India CSR Reporting Survey 2019”, shows CSR spending by the corporate sector has been rising year-on-year. Even though this amount has increased from ₹5,115 crore in 2014-15, it is small for the overall size of corporate India. The total CSR spending, since the law was enacted in 2013, has been ₹71,277 crore on 1,05,358 projects until 2019, as per a report by Invest India. The top three sectors that received maximum funding are education, health and rural development. Another area that received significant funding is environment sustainability. The report also points out that more industrialised states receive a bigger chunk of CSR funding.

Since 2015, for example, Maharashtra, Karnataka, Gujarat and Tamil Nadu have garnered over 30 percent of the total CSR spending. Nearly 44 percent of all spending is done by the companies themselves or via trusts, societies, and Section 8 companies set up by them. Forty-three percent is done through implementation partners. However, states such as Jharkhand, Bihar, Chhattisgarh, Madhya Pradesh and Uttar Pradesh, which account for more than 55 percent of aspirational districts (states with poor socio-economic indicators), received only nine percent of the total expenditure towards CSR.

For development work to be truly effective, such imbalances need to be corrected. CSR has helped put social development on the agenda of corporate India. Many corporate houses work with NGO partners in locations where they have factories, plants or other set-ups, especially in remote or rural areas. The great reverse migration triggered by the sudden lockdown in March 2020 proved that not everyone who chases the urban dream finds a secure perch. The Covid-battered economy is going to test the resilience of food and agriculture supply chains, and livelihood support is going to be the key area of development work that will be increasingly competing for the CSR pot.

With the centre walking a fiscal tightrope and economic slowdown hobbling private investments, recovery after Covid needs to be devised

For overall reboot to happen, monetary help alone is not going to suffice. Spending on socially relevant campaigns around social causes such as environment sustainability, gender equality, and domestic abuse, among others, is likely to have a lasting impact. Many corporates have increased their social advertising. For instance, Godrej Appliances makes the case for shared housework with its #HumSabHomeMakers campaign, some beauty brands have LGBTQ+ citizens or women with acid burns speaking for them.

The lethal second wave of Covid-19 that surged through the country has shown how interrelated the world is, and how irresponsible behaviour can have global repercussions. This eco-consciousness has given rise to corporate campaigns against plastics, oceans, and air pollution. These concerns too will be competing for the CSR kitty in the years ahead. It’s been seven years since India passed the CSR Act, 2013. It got all companies with a net worth of ₹500 crore, or revenues exceeding ₹1,000 crore, or net profit over ₹5 crore, to spend two percent of their average profit over the past three years on CSR programmes. If they fall short, they have to declare the reasons for being unable to meet the statutory requirement. This move encouraged corporates to work closely with the social sector. Over the years, CSR budgets have increased. Nearly 76 percent of companies, compared to 38 percent in 2014-15, now report that they spend at least two percent of profits on CSR. This way corporates in India are roped towards helping in dealing with pressing challenges of the times. The monetary amount might be small compared to the government’s role in social sector expenditure, but corporate involvement brings in many other facets such as innovative ways of working, a corporate culture towards developmental issues that propels creativity in a field that otherwise remained the government’s burden. Companies are also formalising their social impact strategies. They are setting up CSR departments, and disclosing more information on CSR spends.

Swaach Bharat: E-toilets

According to the Invest India “Report of the High-Level Committee on Corporate Social Responsibility 2018”, the number of reporting companies that carry CSR obligation increased by 44 percent over 2014-16. The report suggests that the average spending by a government enterprise on CSR varied between ₹8 crore to 10 per company between 2014-15 and 2017-18, whereas the average spend by a private company steadily increased from ₹72 lakh per company in 2014-15 to ₹95 lakh per company in 2017-18.

With the centre walking a fiscal tightrope and economic slowdown hobbling private investments, recovery after COVID needs to be devised through creative ways. Looking ahead, CSR spending in the near future will depend on how quickly corporate India recovers from the devastating impact of the pandemic.

By A Special Correspondent