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 â€œThere will
be no ‘Inspector Raj’. It is the companies’ money and they will decide what to
do with it, and how to spend it. The provision is about self-regulation”…

Here is a communiqué from Sachin Pilot, Minister
of State (Independent Charge), Ministry of Corporate Affairs

The present corporate social responsibility (CSR) debate
must be viewed in terms of significant challenges before us as a nation. These
include widespread malnutrition, school dropouts, lack of access to sanitation
in rural areas and easily preventable illnesses at all ages. The government’s
flagship programmes are being continuously strengthened to achieve our
objectives in these areas. Private sector efforts can give an extra edge to
these programmes, and result in quicker achievements. A sustained focus on
entrenched problems would ensure greater resource flow, as opposed to
commitments that are vaguely formulated and loosely implemented.

There was a trust deficit in society that corporations are
not contributing enough. This provision can act as a bridge to correct that
perception. We just want a clear-cut commitment from the corporate sector
towards social causes. Most large corporations have undertaken their own CSR
initiatives. The only change is that they now have to mention what they are
spending on, and how much. I am hopeful that these enabling provisions will
allow companies to have a strategic focus on CSR. Every CSR project needs to be
conceived, funded and supported over the long term, and where ownership
transfer is envisaged at a later stage to other, possibly non-profit
organisations, to ensure smooth transfer.

In addition, moving from pure philanthropy to projects
aligned with core corporate objectives is likely to be more sustainable. This
will also ensure that non-financial organisational resources are available.
Companies may also like to consolidate their activities into a few visible
streams.

However, there is a perception that making CSR mandatory
might lead to “Inspector Raj”. I wish to clear the air. There will be no
“Licence Raj” or “Inspector Raj”. It is the companies’ money and they will
decide what to do with it, and how to spend it. The government will not get
into deciding how they will spend it. For instance, a fast-moving consumer
goods company may decide to do things differently than, say, a mining company.
The provision is not prescriptive in nature, but all about self-contribution,
self-regulatory and self-compliance.

There is no confusion in my mind over the issues surrounding
CSR. The National Voluntary Guidelines are more macro in nature and they
address other important aspects of corporate governance, such as
sustainability, environmental impact of businesses and employee welfare. While
they facilitate an overall climate conducive to CSR, it is within the general
framework of corporate leadership.

The decision on CSR provisions of the Bill was taken after
due consultation with the stakeholders. As is well known, the Bill went to the
Parliamentary Standing Committee twice. All stakeholders were aware of the
provisions. In fact, in my consultations with companies, they said they were
happy and were looking at it as an opportunity to demonstrate their commitment
towards society and the environment. India is one of the few countries in the
world with CSR in the statute books. However, it is still an evolving concept.

I am confident that the provisions of the Bill would raise
the visibility of CSR efforts with the company boards and shareholders. In
today’s fiercely competitive landscape, meaningful CSR would provide an added
dimension to brands and embedding entrepreneurs more firmly in the surrounding
communities. Our ground-breaking proposals are also important because of
India’s emerging economic leadership on the global stage.

Our push for large profit-making companies to commit to CSR
has been done in the faith that most of them wish to do so. Although we have
developed a list of illustrative activities that can absorb CSR commitments, it
by no means exhausts the possibilities. We have visible impact and tangible
outcomes in mind. We also aim to create a repository of good CSR projects and
practices. Corporations may, if they wish, adopt some of these to improve their
CSR profile and portfolio. We also wish to initiate CSR sensitivity in
medium-sized enterprises and to provide them off-the-shelf solutions with
maximum positive social impact.

I again wish to underscore that companies would be able to
formulate their own CSR policies and projects. We have created an enabling
provision to strengthen their intent to contribute to society.