Mandating CSR, Killing the Spirit?
By mandating CSR, the Government has brought under the purview of legislation what is fundamentally seen as an inspirational activity. Primarily, it has the potent to stifle the spirit of being “voluntary”. In some ways, through a mandatory legislation, it seems the government is hoping that it can achieve some of the things which it possibly is unable to provide efficiently and effectively to the average citizen of India.
When a government and the legislature struggle to deliver justice efficiently to its average citizen, why bring another law which may not be really called for?
Further, we rank rather low in attractiveness to do business (quantified under the Ease of Doing Business Index). Does this add to the ease of doing business in any manner? Won’t this be looked upon by FDI investors as just another ploy to tax the companies?
Though countries like Sweden, Norway, the Netherlands, Denmark, France, and Australia have mandatory CSR reporting, India, among large-sized countries, will be possibly amongst the first to mandate this. It is estimated that this law would cover anything upto 3000 odd companies and bringing in 2 billion USD or more (rough estimates). That is a lot of money!
The legislation could have been better drafted and better thought through. The Ministry of Company Affairs in a subsequent clarification has indicated that the entries “must be interpreted liberally so as to capture the essence of the subjects enumerated”.
If a company is not able to allocate the mandated 2% of profits in a given fiscal, then the CSR Committee of the Company has to submit an explanation so as to avoid being penalized. The law is curiously silent on what would constitute legally acceptable explanations and what wouldn’t.
While the intention of the government is commendable, so far as strengthening social responsibility of corporates who may afford it, the rules in their present avatar seem to present a significant scope for improvement. One remains hopeful that these anomalies are looked into at the earliest, and the specific sections re-worked.
– Gopal