India Inc gets a way out, Budget gets more funds
The mandatory Corporate Social Responsibility (CSR) which envisaged India Inc spending 2% of its net profits on social schemes was always a bad idea, for a variety of reasons. For one, companies pay taxes for the government to help provide facilities and opportunities for the less advantaged, why should companies have to do this all over again? And if the idea of mandating the amount each corporate had to spend on such activities wasn’t bad enough, and an invitation to bring back another inspector raj in through the back door, the government also began talking of defining what CSR would be. You would think a company setting up a plant and building a school for the children of its employees would qualify as CSR. But, no, the mandarins decreed, this was selfish activity aimed at retaining employees, it didn’t quite have the selfless motives genuine CSR activity should be guided by.
After a lot of consultations with a panic-struck industry, the government has finally come out with what looks to be a sensible way out given the government has decided it is not going to roll back its initial bad decision. Under the new guidelines, contributions to the Prime Minister’s National Relief Fund or to other socio-economic development programmes of the central and state governments for the welfare of SC/ST and minorities and women will also qualify as CSR-spend. This, in a sense, is the route followed for foreign banks who do not have the branch network that state-owned banks have —so instead of being mandated to do priority sector lending that PSU banks have to do, foreign banks can subscribe to, for instance, Nabard bonds to fulfil their priority sector lending targets. In the same way, India Inc can either go through the tortuous process of ensuring its CSR-spend is within the government-specified norms or it can simply give the government the money to spend on various schemes, regardless of whether such schemes actually deliver value to those they are aimed at. For India Inc, CSR will now become just an additional tax, a high one given this period of shrinking bottom lines, but far better than the alternative of having one more set of bureaucrats to answer to. For the finance minister’s budget, perhaps future statements of revenue and expenditure can include one more source of funds, those from corporate CSR?