It is now the time for the country’s leading auto makers to walk the talk as far as their commitment to societal responsibilities are concerned. A CNBC-TV18 analysis of the top five original equipment manufacturers (OEMs) in India has revealed that just one among them invested more than 2 percent of the net profits on corporate social responsibility (CSR).
Though the provision in the newly enacted Companies Act will only kick-in from April 1, 2014, it means that companies from Mahindra & Mahindra, Maruti Suzuki to Hero MotoCorp would have to significantly ramp up their CSR investments in the coming years. The analysis by CNBC-TV18 reveals that barring Tata Motors, the overall CSR spend by the top 5 domestic auto companies was 1 percent or less of their annual profits in the fiscal year 2013.
Take for instance M&M. While it individually made the highest CSR contribution by any Indian auto company in FY13 at Rs 33.5 crore it, however, accounted for just 1 percent of their annual net profits for the year that stood at Rs 3,352 crore.
Same is the case for the country’s largest carmaker. While Maruti Suzuki invested Rs 18.9 crore on CSR activities last year, it accounted for just 0.79 percent of its bottomlines that stood at Rs 2,392 crore.
The numbers are even lower for Hero MotoCorp that spent Rs 1.3 crore on CSR related work last fiscal. This amount, however, accounted for a miniscule 0.06 percent of its profit after taxes (PAT) that stood at Rs 2,118 crore.
And while its rival, Bajaj Auto – the country’s most profitable auto maker undertook various CSR activities in 2012-13, it however did not disclose the exact quantum of investments made for this purpose. Even when an average of the last three years' profits are taken into account, the two percent target is not met. Tata Motors was the only exception last year having invested Rs 19.2 crore in CSR activities that accounted for over 6 percent of the company’s total net profits of Rs 301 crore. But a higher percentage of CSR spend was also on account of a low base effect since Tata Motors recorded the lowest net profits last fiscal among these five auto giants. Interestingly, if an average of the last three years net profits for Tata Motors is taken into account, then it too misses the 2 percent threshold.
Experts also point out that while the CSR calculation for these firms was done on the basis of PAT come April 1, 2014, the CSR would be computed on the basis of profits before tax thereby the CSR outgo could jump multi-fold.
A senior government official told CNBC TV18, “The CSR provision will only kick-in from next fiscal hence companies have the time to organize their CSR activities this year.”
An official of one of these companies also said that the actual CSR investments are higher for most companies since a large chunk of it is done through trusts which are not calculated for this purpose.
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