Indian companies may have to collectively spend close to $2 billion (about Rs 8,700 crore) a year on CSR programmes if the government makes it mandatory for them to spend 2% of profits on social responsibility programmes, a study said today.
Of late, the proposal from the Ministry of Corporate Affairs for making spending mandatory on Corporate and Social Responsibility (CSR) activities has been gaining favour across the country.
"There are about 1,227 Indian listed companies who have posted profits for the last financial year. The total aggregate profits posted by these companies for the last financial year works out to Rs 4,37,167 crore," SMC Global Securities said in a report.
If the proposal becomes a guideline, then all the profit making companies will have to pay 2% of their PAT (Profit After Tax) as CSR.
"Hence, the total amount that Indian corporates have to spend on CSR works out to Rs 8,700 crore every financial year. That is, about $2 billion every financial year," SMC said.
The report further added that oil and gas major ONGC which recorded Rs 22,456 crore as PAT in the last financial year may have to spend Rs 449 crore as CSR.
Similarly, corporate leader Reliance Industries which posted Rs 20,211 crore PAT may have to spend Rs 404 crore towards CSR, while Piramal Healthcare whose PAT was at Rs 12,883 crore may spend Rs 258 crore on such activities.
State-run Coal India and SBI will have to spend Rs 217 crore and Rs 214 crore, respectively on CSR spending. Coal India had a PAT of Rs 10,867 crore, while SBI had a profit of Rs 10,685 crore.
The report said that while the objective behind CSR is noble, proper system and procedures need to be implemented for effective usage of such massive amounts as there is always a risk of misuse of noble intentions.
Yesterday, Reliance Industries' Chairman Mukesh Ambani advocated an Indianised approach towards CSR initiatives.
The government last week said it would be mandatory for corporates to disclose to shareholders whether they have made a contribution of 2% of net profit toward corporate social responsibility activities.