Last month, West Bengal Chief Minister Mamata Banerjee wrote to Prime Minister Narendra Modi about including contribution from businesses to the chief minister’s relief fund (CMRF) as money spent on CSR activities. Currently the 2013 CSR Act only considers donations to the Prime Minister’s National Relief Fund (PMNRF) as CSR spend. This new request was ostensibly due to the lack of funds in CMRF, which many companies choose not to contribute to because of this rule. The fund, which is being used to provide medical, education and other kinds of relief to people who are in desperate need of it, suffers as a result.

While this news isn’t too surprising, it does form part of an increasing trend wherein the State and its many officials are looking at corporate money (in the respectable guise of CSR) to fund their pet projects. Now, many of these programmes deserve to be funded even if they may be only partly effective because in a poor country like India millions of people still subsist on State support. However, if it’s State support, then it should come out of State funds. After all, what is the point of all those taxes and GDP growth if it cannot be used to provide a dignified life to every Indian?

Decreasing govt funds, increasing CSR money

The central government’s budgetary allocations to most of its flagship schemes have either flatlined over the years or seen a marginal increase that is still not commensurate with the actual expenses needed to implement these programmes. For some schemes, it has actually decreased. Also, the Union Budget registered a decline in social sector allocation, from an actual 1.92 per cent of GDP in 2013–14 to 1.68 per cent of GDP in the budget estimate for 2015–16 – a decline of 0.24 per cent. Among the BRICS countries, India has the lowest allocation for education and health in terms of percentage of GDP. All this while the population continues to steadily grow and unemployment figures see no sign of decline.

Instead of plugging the leaks in the delivery and implementation of these much-needed welfare schemes and increasing allocation, government officials seem to be turning to CSR to bridge the monetary gaps between funding and expenditure. In 2015, BJP MP PP Chaudhary (currently Union minister of state for corporate affairs and law & justice) asked over 11 lakh companies to contribute 7 per cent of their CSR funds to Swachh Bharat Mission and sponsor billboards for gram panchayats carrying the Swachhta message. But that was not all; he also wanted the employees of these companies to go and undertake cleanliness drives to presumably clean up the mess that they may or may not have been responsible for. It’s a wonder he didn’t personally supervise these drives.

Some CMs are not even waiting for the central government’s nod. Earlier this year, Haryana CM Manohar Lal Khattar announced plans to tap into the CSR funds of 21 public and private sector companies for welfare schemes such as Kanya Kosh Fund and Sweh Prerit Adarsh Gram Yojana.

Setting an unwanted precedence

Leading the way is PM Modi, who has exhorted corporate India to invest in all flagship programmes of his government including Swachh Bharat, Skill India, Namami Gange, and Beti Bachao, Beti Padhao, among others. This creates indirect and not-so-subtle pressure on companies to do the needful if they want to remain in the good books of Lok Kalyan Marg.

Even though in 2015 a government-appointed committee – headed by former urban development secretary Anil Baijal – to look into monitoring of CSR expenditure recommended that CSR spend be left to companies, there are many MPs who believe otherwise. For example, in this report, BJP MP Raksha Nikhil Khadse claims that the available CSR corpus can reduce government spending by 30 per cent and is easier to tap into than MP/MLA local area development funds as it has fewer strings attached. This kind of outsourcing of State responsibilities to corporates should alarm every right-thinking person, not least because of the potential for corruption, kickbacks, and plain inefficiency. In the same report, SK Jain, executive director of CSR at NTPC Ltd, said that the company receives between 50 and 100 requests every year from elected representatives to channel CSR funds into certain (read, their preferred) projects.

PM Modi has exhorted corporate India to invest in all flagship programmes of his government including Swachh Bharat, Skill India, Namami Gange, and Beti Bachao, Beti Padhao, among others. This creates indirect and not-so-subtle pressure on companies to do the needful if they want to remain in the good books of Lok Kalyan Marg.

MP files formal complaint about CSR non-compliance against a few companies. Should he?
In early July, an elected member of parliament from Shiv Sena representing one of Maharashtra’s constituencies in the Lower House filed some interesting complaints against large corporate houses before the petitions committee. This was with regard to their corporate social responsibility (CSR) practices. In the complaint letter, whose copy was sent to PP Chaudhary, union minister of state for law and justice and the ministry of corporate affairs, and Injeti Srinivas, secretary, ministry of corporate affairs, the said MP specifically named companies and stated that they were not complying with the CSR Rules as per Schedule VII and Section 135 of Companies Act 2013. The MP’s letter mentions, point by point, the clauses that the companies are not complying with. It alleges that the companies do not have any vision or intent to contribute towards the nation-building process. Team CauseBecause learnt about the same, managed to obtain a copy of the letter, and ran a CSR fact-check on the companies whose names were mentioned. Interestingly, none of the allegations/accusations made in the letter were true and the said companies were in fact found to be doing more and investing more than required by the government’s mandate. Moreover, some of the companies have several model CSR programmes that have been formally acknowledged by various departments of the state and the central government, including a few chief ministers. Further interactions with sources close to the ministry of corporate affairs revealed that more such letters from various MPs, state ministers and even members of legislative assemblies continued to reach the ministry’s office. Some of the MPs also send letters requesting the ministry to pursue (‘order’ would not be an appropriate word) the companies operating in their areas, either to work on projects or schemes floated by them in their constituencies, or to support not-for-profit organizations who they ‘believe’ are doing good work.

CB view

Until the CSR law, local MPs and MLAs were least bothered about the social side of companies and reached out to them only with simple requests like sponsoring of some or the other event, such as conferences and seminars, or for one-time donations for charities. Such requests were ‘requests’ and corporates obliged if only to have cordial relationships with the local politicians. In the current scenario, the CSR pie is sized at around Rs 15,000 crore and many individuals and organizations are eyeing a slice of the same, trying various ways to reach out to the companies with larger spend share. Hence, the ones who possess political power as well as those close to powerful individuals are making all possible moves for their share of the CSR kitty. The ministry of corporate affairs should curtail this practice and also discourage politicians from filing the kind of complaints mentioned earlier on. A democratically elected person, with the responsibility of addressing the concerns of one of the country’s 545 constituencies, should at least research the facts that are out there in the public domain, before signing letters that are drafted by those with apparently vested interests.

Incentives or coercion

There’s no dearth of incentives from the government to induce corporates to invest CSR money in their many programmes. Unlike most CSR activities, only investments in Clean Ganga Fund and Swachh Bharat Kosh (apart from donations to PMNRF) are 100 per cent tax-exempted. This stems from the high priority given by the central government to these two programmes and caters to their own political agenda, even though the overarching goals may be noble. Whether this kind of preferential treatment is fair is debatable – excessive focus on certain projects may dilute and negatively impact the efficacy and funding of other equally worthy and urgent projects.

Some incentives are smart and acceptable though – for instance, last year the government launched an interactive web page on the NMCG (National Mission for Clean Ganga) website to encourage private companies to take up projects under Namami Gange as per their preference. However, Nitin Gadkari, minister for road transport, shipping and water resources, was on record stating the need for CSR resources from companies to help in this mission, thereby again contributing to this myth that CSR money should be subservient to government priorities. While on paper this may have come across as an innocent plea, the fact that more than 80 per cent of donations to the Clean Ganga Fund has come from public sector companies (till early 2017) is an indication that perhaps when it comes to the CSR decision-making process, companies have limited autonomy.

CB view
The government would do well to ensure enforcement of the current laws, most importantly the ‘2 per cent of profit’ spend rule, rather than jostling for funds from these corporates. Relying on CSR funds as a fall-back option or, in many cases, as the primary source of funds is a slippery-slope to nowhere, with no end in sight. Once government officials and parliamentarians start perceiving corporate funds as their own to dispense, it can only lead to chaos and sheer waste of resources and time. CSR funds come from the company’s profits; it is for to them to spend it as they see fit within the guidelines issued. Of course, this doesn’t mean that the guidelines can be arbitrary and prioritise certain programmes over others. Outlining the causes and sectors, as the 2013 Act currently does, is more than enough to ensure corporates have the flexibility and leeway to invest their CSR money as they deem fit. From the government’s end, what is needed is clarity and holding corporates accountable to the law. The welfare and well-being of a country’s citizens is the job of its elected representatives. The entire point of the CSR Act is to ensure that the private sector gives back to the society and does its part in building a better India. CSR is to complement the government’s work for the common people, not to provide monetary support. And it is surely not their job to fund government schemes that are to be managed and executed by the State. Encroaching upon CSR money to deliver basic necessities to people is wrong in every way and will only lead to further politicisation of an otherwise neutral, noble concept as well as wrong-headed strategies and poor outcomes. We already have neo-liberalism wreaking havoc with big business, growing inequality, and growing cuts in welfare; increasing corporatisation of State welfare is bad for the people as well as corporates. The government needs to stop looking for convenient band-aids to its problems and start cleaning up its own house.