At least 33 companies, or one-third of firms on the S&P BSE 100 list, spend less than the mandated amount under the Companies Act on corporate social responsibility (CSR), according to a report in Business Standard.
The Ministry of Corporate Affairs (MCA) is sending out notices to check how the CSR funds are spent by the corporates.
The public sector undertakings met the 2 percent target spending, but their actual spending at Rs 20.6 billion this year was lower by almost 14 percent, following a 26 percent decline in their three-year average profits. In contrast, the private sector missed the 2 percent target as the average rate stood at 1.8 percent with an overall spending of Rs 47.3 billion, according to Amit Tandon, managing director at proxy voting firm IiAS (Institutional Investor Advisory Services).
The overall CSR expenditure of corporates in the year 2016-2017 was Rs 9,034 crore with most of the funds going to the education sector, according to PRIME database.
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The moves comes a day after MoS Corporate Affairs P P Chaudhary said that corporate social responsibility spending by companies warrants auditing and hinted at the government examining ways to improve procedures relating to CSR spending outlined in the Companies Act of 2013.
Under the Companies Act of 2013, the corporates or businesses with a net worth of over Rs 500 crore or revenue are required to spend 2 percent of their three-year average profits to help society in causes that range from healthcare and education to poverty, the environment and rural development. The areas of causes, however, may include a range of activities that can qualify as CSR.
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Most companies have increased spending on CSR, Tandon's research stated. The S&P BSE 100 companies spent Rs 70.5 billion, an increase of 8 percent, from the year before, which puts CSR spending at 98 percent of the prescribed amount.
The government had set up a high-level committee in 2015 to take a closer look whether it was being carried out as intended. The committee has since then been sending notices to companies to provide details of its CSR spendings.