Indian Inc questions mandatory CSR

Rahul Bajaj, chairman of Bajaj Group, told The Indian Express that the government "succumbed" to the pressure exerted by the standing committee on finance and members of Parliament, who were keen on making it mandatory in the Bill.

"The Companies Bill that has been passed by the Lok Sabha has many important features including those relating to independent directors, auditors. However, the most noteworthy and new feature of the Bill makes every corporate meeting certain criteria liable to spend 2 per cent of the average net profit of the last 3 years on CSR activities or explain why it has not been done so. Such a provision probably does not exist in Companies Act of any major economy of the world. It appears that the standing committee and most Parliament members were very keen on the provision and hence the government succumbed to the pressure," Bajaj said.

He said that most of corporates spend amount for CSR activities and "I can't agree that philanthropy, CSR activities and our generosity should be mandatory."

After getting delayed for several years, the Bill was finally passed yesterday through voice vote by the lower House.

The Bill brings the management of the corporate sector in line with global norms.

It introduces concepts like responsible self-regulation with adequate disclosure and accountability, ushers in enhanced shareholders' participation and provides for a single forum to approve mergers and acquisitions.

Venu Srinivasan, chairman of TVS Motor, also said making the CSR spend mandatory is akin to levying another tax.

"The new Bill has tried to strike balance between the autonomy of the board. (On the CSR) If it is made mandatory, it becomes another tax in a sense. I am not comfortable with that position. But in a country like India, if companies don't undertake CSR activities, we will have serious issues in the long term. It is not a great deal of money (2 per cent of net profit) but on a principle basis I am not comfortable with it, even though I am not against CSR," he said.

"The emphasis has been on improving the corporate governance. The most welcoming step is the inclusion of one woman director on board... I was hoping that the government would incentivise the CSR activities," Kiran Mazumdar Shaw, CMD, Biocon, said.

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