You are here: Home » Companies » News
Business Standard

CSR spends have a geography problem as charity begins and ends at home

Funding is largely limited to states where industry is concentrated; those with low industrialisation are likely to have been starved of critical funds

Sachin P Mampatta & Krishna Kant 


Charity begins (and ends) at home for corporate India.

Developed states which house India’s largest companies, tend to get more money from their (CSR) budgets shows an analysis of listed companies’ spends from Prime Database compared to government figures on at Factor Cost (current prices).

A state like Bihar ranks 17th on a list of 32 states and union territories for which data is available. Topping the list are industrial powerhouses like Maharashtra, Gujarat and Karnataka. The correlation between these three states' economic output and the amount of spends is 0.93. Zero indicates no correlation, and one indicates perfect correlation.

The reasons for this concentration in CSR spends may not be hard to find.

Most of India’s industry is concentrated in a few states. of a certain size are required to mandatorily spend two per cent of their average three-year profits on It stands to reason that would spend money where they are located.

The concentration of industry has been a problem that policymakers have dealt with for decades. The RK Hazari Committee report in 1966 noted the problem of regional concentration. And it has persisted since then. A problem as long-standing and deeply entrenched as the concentration is unlikely to go away quickly. This means that CSR spends may also continue to face concentration issues.

Swetank Mishra, who runs a developmental non-governmental organisation called Sahej said that poorer regions would be better served with such funds. And interestingly, the government does prioritise certain regions when it comes to allocating funds.

Uttar Pradesh, Bihar and Madhya Pradesh get the maximum share of central resources shows data on the devolution and transfer of resources from the centre (Click here to read the report). This seems to follow the policy of redistribution of resources so that backward regions can develop better.

And is in sharp contrast to the patterns in

One could make an argument for mandating spending in backward states when it comes to CSR too.

But a question would arise as to whether corporates can spend effectively when they are not familiar with the territory or its problems. Would they be able to monitor such spends effectively in the most backward of regions?

A partnership model with local governments is one way to involve local governments and corporate expertise.

But there may be an argument to be made to consider to let the government take up the role entirely. Corporates remit the money to governments, just like their taxes. And let central, state and local governments decide where to spend the money.

With the government, elected representatives are accountable to voters. Spending on backward, populous regions can help win votes. Governments also have the last-mile connectivity required to bring projects to fruition and monitor them. The accountability of such public projects is also likely to be higher than privately-owned ones. have no accountability from voters. Shareholders are hardly directly impacted by its charity work. So well-directed spending cannot be expected to occur as a natural consequence of mandatory CSR.

It makes very little sense for the government to run companies. It may make even less sense for companies to do what the government should.

First Published: Tue, December 18 2018. 12:32 IST