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Why Social Responsibility Target of Indian Corporates Falling Short of Target

The Companies Act, 2013 mandates the companies to spend at least 2% of the net average profit earned over the previous three years towards Corporate Social Responsibility requirements. The Indian corporate world saw an increase in CSR spending from Rs.8345 crore in 2015-16 from Rs. 6526 crore in the previous year. While healthcare and education remains the top choices for CSR spending, other gainers include Prime Minister’s National Relief Fund and other funds set up by government.

While compliance has risen, a closer look at the data shows an unspent amount standing high at Rs 1,984 crore, indicating that a large number of companies did not spend the mandated amount on CSR and failed to meet their social obligation mandated by the statutory Act. While companies like NTPC, ONGC and Reliance Industries accounted for the largest CSR spending during the year, Bharti Airtel and HCL Technologies failed to spend the mandated 2 per cent obligation.

Reasons for the unspent amount include factors such as not being able to identify the right project or opportunity and lack of being able to find an implementing agency. Companies often go for passive CSR spending such as transferring money to Prime Minister’s National Relief Fund or other such funds. It is easier and efficient to just write cheques than putting up a team, identifying and managing a CSR project.

While healthcare and education remain the biggest areas for CSR spending, other major areas include spending on combating diseases such as AIDS, malaria and other diseases, PM’s relief fund or other funds set up by Central and state government’s for socio-economic development.

For region-wise expenditure, Andhra Pradesh and Telangana and Maharashtra occupy the top most positions, Gujarat, Rajasthan and Tamil Nadu following them.

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