New CSR norms detailed but quick implentation difficult

Moneycontrol Bureau

The government on Thursday put out a notification providing guidelines for ‘corporate social responsibility’ for corprorates.

The norms, which come into effect on April 1 this year, will become applicable to companies that earn a net profit of Rs 5 crore or have a turnover of Rs 1000 crore or a networth of Rs 500 crore.

“The rules have been finalised after extensive consultations with all stakeholders and provide for the manner in which CSR committee shall formulate and monitor the CSR policy, manner of undertaking CSR activities, role of the board of directors therein and format of disclosure of such activities in the board’s report,” Corporate Affairs Minister Sachin Pilot said.

Companies will now have to spend 2 percent of their yearly net profits on CSR activities, the notification said, while detailing the scope of what constitutes such activities.

"The CSR rules have answered many questions the companies had,” Santhosh Jayaram, Technical Director - Sustainability and Climate Change at KPMG India.

He added that the notification provide much clarity after the draft version was issued last year. “The time taken for release of the rules is justified by the clarity the rule has brought out in comparison to the draft rules.”

“The highlights are the expansion of the schedule VII, the clarification of applicability to foreign companies and the clarity on what qualifies CSR expenditure,” Jayaram said, adding that, the rule “raises the governance of CSR” in the country and brings in greater transparency.

Harinderjit Singh, Partner, Price Waterhouse said that while enhancing activities was a welcome move, the company’s board of directors should have been empowered to decide the CSR activities.

But he added that the time between now and April 1 may be short for companies to become CSR-compliant. “What if someone already had a CSR programme running for years, now they have to modify and align with Scheme VII to become CSR complaint under Section 135 of the Companies Act?”