Govt to double CSR contribution of top earning PSUs

New norms expected to be finalised in few days and likely to be implemented from the beginning of FY14

Top earning PSUs like ONGC, BHEL and NTPC may have to double their expenditure on corporate social responsibility (CSR) as per the new draft guidelines being finalised by the Department of Public Enterprises (DPE).

Under the proposed norms, Central Public Sector Enterprises (CPSEs) with net profit of over Rs 500 crore in the previous year will have to earmark 1% of it from the current level of 0.5% for CSR activities. However, the upper limit of 2% remains unchanged.

"As per the proposal, now the PSUs earning profit after tax of over Rs 500 crore have to raise their expenditure on CSR to 1% as 0.5% is too small," Secretary in the Department of Public Enterprises OP Rawat said.

The new guidelines are expected to be finalised in the next few days and likely to be implemented from the beginning of 2013-14 fiscal, he added.

Currently for those government companies whose net profit is Rs 500 crore and above in the previous year, their CSR spending ranges between 0.5% and 2% of their profits.

However, the percentage of earmarking funds remains the same for PSUs having net profit of less than Rs 500 crore.

PSUs with net profit between Rs 100-500 crore are required to earmark 2-3% and public sector companies with a profit of less than Rs 100 crore are required to contribute 3% of their income for undertaking such activities.

At present, CSR and sustainable development are two separate subjects and are dealt differently for the purpose of Memorandum of Understanding (MoU) evaluation.

The draft guidelines suggests combining CSR and sustainable development into one set of norms.

"CSR and sustainable development have been combined together because they are inter-coined subjects," Rawat said.

Besides, CPSEs would be required to disclose the reasons for not fully utilising the budget for CSR and the sustainable development for the same year, as per the draft guidelines.

"They have to ensure that they spend full amount earmarked for corporate social responsibility, otherwise, they have to disclose why they have not spent these funds," he said.

The proposed guidelines stated that if PSUs are unable to spend the earmarked amount for CSR in a particular year, it has to be spent in the next two years.

"If CPSEs fail to utilise the funds in the next two years, the remaining amount will go to a sustainability fund which will be managed by a different implementation mechanism in the DPE," the Secretary said.

The draft guidelines continue to exempt sick and loss-making PSUs from allocation of budget for undertaking CSR activities.

Of the total 249 CPSEs, there were 158 profit-making PSUs, as on March 2011.