With More Than 1.27 Trillion Rupees Spent, CSR Expenditure Skewed Towards Certain Sectors & States
Data on the Corporate Social Responsibility (CSR) funds & related expenditure indicates that more than 1.27 trillion rupees were spent as part of CSR between 2014-15 & 2020-21. However, bulk of this spending is skewed towards certain sectors & states.
To tackle socio-economic issues like malnutrition, poverty, illiteracy among others and to make the country’s corporate sector more involved with the development sector, the government came up with statutory obligations under Corporate Social Responsibility (referred to as CSR) in the Companies Act, 2013. One of the stated objectives of including this provision in the law is to enhance the accountability and disclosure of corporates and involve them in social development. The statutory provision promotes responsible and sustainable business by making it mandatory for large companies in the country to channel their efforts into addressing social and environmental concerns across the country and hence, work towards the achievement of Sustainable Development Goals (SDGs).
India was one of the first countries in the world to create a legal framework on CSR
By mandating CSR through statutory obligations, India became one of the first countries in the world to create a legal framework on CSR and statutorily mandate companies to report on the same. The legal framework of CSR in India is given below:
Every company registered under the Companies Act, 2013, with specified thresholds of turnover, net worth, or net profit during the immediately preceding financial year, is mandated to spend at least two percent of the average net profits made during the three immediately preceding financial years on welfare works under CSR. Some of the companies with high CSR spending include Reliance Industries Ltd, ONGC, TCS Ltd, Infosys Ltd, etc.
1.27 Trillion rupees spent by companies under CSR in last seven years
Since the enactment of CSR provisions in April 2014, companies have spent nearly 1.27 trillion rupees or 1.27 lakh crore rupees in a span of seven years as per the data available on the National CSR Portal based on the disclosures made by companies. This money has been spent across 29 different sectors such as health, education, environment, welfare, development, and others. From over Rs. 10,065 crores spent in 2014-15, the CSR expenditure in India has increased to Rs. 25,715 crores in 2020-21 registering a 2.5-times increase in the seven years of implementation.
Education, Health & Rural Development received 60% of the CSR expenditure
With nearly Rs. 36,815 crores, the education sector received 29% of the CSR expenditure between 2014-15 and 2020-21. The health sector comes next with 20% of the CSR expenditure of Rs. 25,391 crores. More than Rs. 12,300 crores were spent in Rural development projects which accounted for 9.7%. The three sectors are the only ones to receive more than Rs. 10,000 crores each of CSR expenditure and together accounted for nearly 59% of the total CSR expenditure incurred in the country in seven years.
Environmental sustainability, malnutrition, hunger and poverty, livelihood enhancement projects, central government funds including PMNRF, sanitation, art & culture, and vocational skills received more than Rs. 2000 crores each and together contributed to another 29.4% of the expenditure.
Safe drinking water, women empowerment, natural resources conservation, gender equality, animal welfare, orphanages, armed forces (veterans, war widows, etc.), special education, Swachch Bharath Kosh, sports, technology incubators, senior citizens welfare, agroforestry, slum area development, and socio-economic inequalities are the other sectors in which CSR amount is used. These sectors accounted for <9% of the CSR expenditure. For the remaining expenditure (~3%), companies have not disclosed the details of the projects.
CSR funds were diverted to tackle the pandemic in 2020-21
The trend in spending across the sectors indicates that companies diverted CSR funds to combat the COVID-19 pandemic. Data shows the following broad trends.
- Sectors such as healthcare, poverty eradication, and slum development witnessed an increase in CSR expenditure in 2020-21 while other sectors like education, art& culture, livelihood enhancement, vocational skills, sports, gender-related, and environment-related sectors witnessed a drop compared to the previous years.
- While expenditure on healthcare and poverty eradication increased by 47% and 19% respectively, the expenditure on art & culture and vocational skills dropped to nearly half in 2020-21.
- Donations to PM’s National Relief Fund more than doubled in 2020-21 as compared to 2019-20 and donations to other Central Government Funds increased by 67% during the same period. Donations to PMNRF have increased over the years and stood at Rs. 1679 crores in 2020-21 compared to Rs. 228 crores in 2014-15. In other words, donations to PMNRF increased by over 7 times during this period.
- Expenditure on the welfare of senior citizens, armed forces veterans and widows, animal welfare, Swachch Bharath Kosh, Save Ganga and technology incubators increased in 2020-21.
The government made an amendment to Companies (CSR Policy) Rules, 2014 during the pandemic enabling companies to undertake CSR activities in their normal course of business for undertaking research and development of a new vaccine, drugs and medical devices related to COVID-19 for financial years 2020-21, 2021-22 & 2022-23. The government also allowed the spending of CSR funds for carrying out public outreach campaigns on COVID-19 vaccination, setting up of makeshift hospitals and temporary COVID care facilities, creating health infrastructure for COVID care, the establishment of medical oxygen generation and storage plants, manufacturing and supply of Oxygen concentrators, ventilators and other medical equipment for countering COVID-19.
5 states received one-third of the total CSR expenditure
The cumulative CSR Expenditure in the seven years was the highest in Maharashtra with nearly Rs.18,608 crores. Since 2014-15, Maharashtra, which is the highest contributor to India’s GDP, has been the highest recipient of CSR expenditure. Five states- Maharashtra, Karnataka, Gujarat, Tamil Nadu, and Andhra Pradesh account for one-third of the CSR expenditure in the country over the years. If Delhi is included, the six states accounted for 36.6%. At the same time, the northeastern countries received only 1.4% of the CSR expenditure. Excluding Assam, they received 0.27%.
‘PAN India’ is the category used when companies have mentioned PMNRF, Swacch Bharat Kosh or Clean Ganga Fund or Any Other Fund or if they have mentioned more than one state for a particular project/activity. Spending on PAN Indian projects alone was 32.7% of the total CSR expenditure and that on PAN Indian Central Government Funds was nearly 7.5%. PAN India spending including both these expenditures was more than Rs. 51,000 crores.
Data highlights skewed nature of CSR Expenditure
The data highlights the skewed distribution of CSR expenditure to certain development sectors & states. The three sectors- healthcare, education, and rural development received more CSR funds compared to other sectors like gender equality, socio-economic inequalities, minority empowerment, and natural resources conservation. Moreover, some states which contribute more to the GDP received a lion’s share of CSR funds compared to other states.
A new disclosure framework was released by the government in early 2022 which mandates filing a detailed report for 2020-21, expenditure on ongoing projects and new projects, creation of capital assets, impact assessment, etc. Considering the quantum of money spent on CSR in India, there is tremendous potential for the social, environmental, and economic development, provided it is used effectively. It remains to be seen if the distribution of spending changes in the coming years.