CSR practices to come under Lokpal ambit?

On September 17, the Central Vigilance Commissioner (CVC) reopened the debate on the mandate of the proposed Lokpal by suggesting that corporate groups should be brought under the purview of the proposed anti-corruption bill. The CVC said that the Lokpal can effectively keep a check on the graft.

If the proposal of the CVC is accepted, the CSR activities of the companies will automatically come under the Lokpal purview. More so, as spend towards CSR (two per cent of net profits) are most likely to be become mandatory after the passing of the Companies Bill 2011, the CSR departments of corporate groups will have to go an extra mile to perform.

Also, as Lokpal is backed by a ‘social’ idea, its focus will undoubtedly be to ensure that the CSR claims of the large corporate groups are true and that the funds allocated for social activities are appropriately spend.

The case of non-seriousness towards CSR and inappropriate use of funds allocated for social responsibility was highlighted when Comptroller & Auditor General (CAG) reported that Maharatan company Coal India under-utilised the budgetary allocation for its corporate social responsibility (CSR) schemes. CAG, in its report tabled in Parliament, said that the budget allocation of CIL for community and peripheral development was Rs 211.8 crore in the period from 2004 to 2010. This was mere 0.7 per cent of the company’s aggregate net profit of Rs 31,062.3 crore.

‘Even the allocated amount was not fully utilised as the utilisation of funds (Rs 153 crore) during 2004-10 fell short of budgeted allocation in all its subsidiaries, thus allowing the CSR activities to remain unfulfilled. Moreover, CIL is also running 191 coal mines without any environmental clearance,’ the CAG report said.

As CVC has no power to check corruption in private firms and CAG can only look into the financial misappropriation during its annual auditing, there is no official body to keep check on the CSR activities or any other irregularities.

Lokpal here can play a significant role if it gets power to intervene and keep check at least on the CSR activities of the company.

To drive home the point that corporate groups have played a crucial role in abetting corruption CVC in the Parliament cited examples of 2G spectrum allocation scam and the Satyam scam.