CSR funds for public sector companies continue to become more complicated. On 3 January 2019, the latest Standing Committee on Coal and Steel report by a parliamentary panel (the 48th such report) was presented to the Lok Sabha and it expressed concerns on the overlap of funds from two different sources for CSR work in mining areas.

Over Rs 15,500 crore was disbursed to states for projects under the District Mineral Foundation (DMF), while at the same time PSUs were required to spend a majority of their CSR funds in the areas peripheral to their operations. As per the aforementioned report, about 80 per cent of CSR funds was spent by these PSUs in the same mining areas, resulting in an overlap.

DMF has been set up in states under the Mines and Minerals (Development and Regulation) Amendment Act (MMDR), 2015, to implement welfare programmes from a portion of the royalty for mining leases. The objective of DMF is to work for the benefit of people in areas affected by mining-related operations. DMF is funded through prescribed rates from holders of mining lease which are: a) 30 per cent of the royalty for leases granted prior to 1 December 2015, and b) 10 per cent of the royalty for leases granted on or after 1 December 2015.

Directives have been issued to all states that DMFs will implement the Pradhan Mantri Khanij Kshetra Kalyan Yojana (PMKKKY) using the funds accruing to DMF. At least 60 per cent of PMKKKY funds are to be used for welfare measures such as drinking-water supply, environment preservation and pollution-control measures, healthcare, education, and welfare of women and children. DMF has been set up in 338 districts of 12 mineral-rich states in the country.

As of August 2018, Rs 15,547.83 crore was collected and disbursed to states to implement schemes under PMKKKY. The report pointed out the issue in districts where DMF funds were disbursed as well as CSR programmes implemented as part of the requirement for PSUs to spend a majority of their CSR funds on nearby areas. The committee was of the view that the requirement of utilisation of CSR funds in the same area for the same purpose needed ‘deeper analysis for its prudent diversion to other need areas’. The recommendation was to avoid this unnecessary overlap by reviewing the mandatory provision of spending 80 per cent of CSR funds in mining areas where DMF funds were also spent. This would ensure that CSR funds were spent in other areas where there might be a greater need for interventions.

The panel also found that as of August 2018 only projects worth Rs 4,888 crore could be completed as against a total collection of Rs 21,235 crore, and asked the ministry of mines to develop a monitoring mechanism. Even for DMF, progress was slow – out of a total collection of Rs 21,235 crore, only projects worth Rs 15,548 could be sanctioned.