Corporate CSR spends hide more than they reveal

In FY21, corporate social responsibility (CSR) spending by Indian companies fell 64% over the previous year due to lockdowns, but the details for FY21 made available recently hide more than they reveal.

A comparative data by the Ministry of Corporate Affairs (MCA) shows a large part of CSR funds are going to unknown sources for unknown purposes. The total of such funds, classified as “any other fund” and “NEC/Not mentioned” add up to ₹7,120 crore between FY15 and FY21 – ₹3,741 crore classified as “any other fund” and ₹3,379 crore marked “NEC/Not mentioned”.

There is yet another area of concern that needs immediate attention. A large number of companies keep reporting “zero spending” and “less than prescribed” spending year after year – more than those who are spending more than prescribed. The MCA data shows during FY15-FY21, the total number of companies reporting “zero spent” was 64,415, while those spent “less than stipulated” were 25,464 and those “more than stipulated” 27,527.

CSR is funding PM CARES Fund

Data provided by the MCA doesn’t say how much of the CSR fund was given to the private and unaccountable (out of the RTI Act’s purview) PM CARES Fund in FY21, while disclosing that ₹513 crore was given to the PM Relief Fund during the fiscal.

Revealing funding to the PM CARES Fund is critical for the following reasons (other than it is private and unaccountable). The RTI responses from PSUs had revealed in 2020 that 38 PSUs had given ₹2,105 crore to the PM CARES Fund (over a period of five months in FY20-FY21), in many cases from their CSR funds. The PM CARES Fund was launched with just four days left for the financial year of FY20 to end. The leading donors were oil PSUs, ONGC (₹300 crore), NTPC (₹250 crore), Indian Oil (₹225 crore), Power Finance Corporation and Power Grid (₹200 crore each) etc.

How much the PSUs donated to the PM CARES Fund in FY21 is not known. What is known? Many of these PSUs were in the top 10 most debt-ridden firms in India in FY21: ONGC, a cash-rich company till recently, had ₹1,33,187 crore in total debt, NTPC ₹2,12,451 crore, Indian Oil ₹1,16,653 crore and Power Grid ₹1,43,210 crore.

What public purpose their donations to the private and unaccountable fund serves is not known because the PMO – which runs the PM CARES Fund with official domain name, headed by the Prime Minister of India and many other ministers and uses official symbols – doesn’t disclose how much and what it does with the funds mobilized from public and private entities and individuals.

In all, the PM CARES Fund received ₹4,316 crore from corporate entities (public and private) during the first wave from March-May 2020 and ₹85 crore during March-June 2021, CRISIL disclosed a few months ago.

In contrast, all that the fund itself has disclosed until December 10, 2021 is a receipt of ₹3,076.62 crore in the last four days of FY20. How much it collected from April 2020 to November 2021 (20 months) hasn’t been disclosed, nor how any of it (₹3,076.62 crore) was spent.

The CSR fund is supposed to be spent on specific works listed in Schedule VII of the Companies Act of 2013. To facilitate donations to the PM CARES Fund, the law was amended in May 2020.

CSR fund for statues and temples

That is not all. CSR fund is being diverted to build statues and temples too. Very few know that CSR fund was diverted to build the Statue of Unity (Sardar Patel’s statue) in Gujarat. The Comptroller and Auditor General of India (CAG) reported that five central PSUs - ONGC, HPCL, BPCL, Indian Oil and Oil India - donated ₹780 crore in FY17 – the source of which was not disclosed. But it added, “thereafter, all the five CPSEs contributed a total of ₹146.83 crore (ONGC Rs 50 crore, Indian Oil ₹21.83 crore, BPCL, HPCL, OIL ₹25 crore each) towards this project under CSR.” What could have made the oil PSUs to generously help in building a statue in Gujarat instead of putting it to use for more sensible purposes?

At the peak of the devastating second wave of the pandemic (May 2021), these five oil PSUs also declared they would donate ₹100 crore to “redevelop” Badrinath Dham shrine, instead of spending on hospitals and oxygen plants that India desperately needed as scores dropped dead every day throughout the country for months during the time. In 2019, ONGC had donated ₹5 crore for Puri temple’s “restoration.”

CSR is not meant for building statues, nor to renovate a temple unless the temple is damaged by a company’s operations. Such diversion of CSR fund defeats its very purpose.

The High-Level Committee (HLC) report of 2015, which looked at its implementation, said: “The rationale behind CSR legislation is not to generate financial resources for social and human development since the resource gap…The objective of this provision is indeed to involve the corporates in discharging their social responsibility with their innovative ideas and management skills and with greater efficiency and better outcomes.”

Surely, donating CSR funds to PM CARES Fund or to build statues and temples don’t count as utilisation of corporate sectors’ innovative ideas and management skills or their greater efficiency for better outcomes.

The MCA data shows that in the past seven fiscals corporations have spent ₹109,692 crore on CSR. But given that a large number of companies are reporting “zero spent” every year – and annual average of 9,202 companies during FY15-FY21 – the utilisation rate of CSR funds is not known. That is because the law provides that eligible companies are required to spend 2% of their average net profits every year on CSR but the MCA doesn’t disclose what this amounts to year after year.