CSR without compulsion will have more substance: economist

There is a need to evaluate the Corporate Social Responsibility activities probably will have more substance than the compulsory CSR, an economist and former member of the Planning Commission has said.

Economist Abhijit Sen also cautioned, "since compulsory CSR is a recent phenomena, we must be very clear what we expect from it as outcome and impact is the real test of CSR investment".

"CSR activities without compulsion probably will have the more substance than the compulsory CSR. Companies may take this compulsory CSR as other form of tax," Sen said here, as per release issued by Centre for Research in Rural and Industrial Development (CRRID), Chandigarh.

The Ministry of Corporate Affairs has notified that with effect from April 1, 2014, every company, private limited or public limited, which either has a net worth of Rs 500 crore or a turnover of Rs 1,000 crore or net profit of Rs 5 crore, needs to spend at least 2 percent of its average net profit for the immediately preceding three financial years on CSR activities.

Sen during the valedictory address at the three-day national seminar on CSR here further said, unlike evaluation of government schemes, there is a need to evaluate the CSR activities of the corporates in a more "pro-active manner". Sen, a Professor at Jawaharlal Nehru University said, 2 percent of profit as mandatory CSR just tantamount to 31.4 percent corporate tax instead of 30 percent.

R S Ghuman, Nehru SAIL Chair Professor at CRRID, highlighted that nearly 8,000 companies, covered by the CSR clause are likely to generate about Rs 150 billion annually for investing in CSR activities.

During the last 20 years there has been a 15 percentage point of shift of GDP in favour of the corporate sector. This had led to enormous amount of inequality, Former Director General CRRID, Sucha Singh Gill, said.