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Bhupesh Bhandari: Charity by coercion

Bhupesh Bhandari  |  New Delhi 

Bhupesh Bhandari

Maneka Gandhi, the minister for women and child development, castigated industry associations last week for being non-serious about social work. "When it comes to doing something for the country, they do very little other than talking," she thundered at a function organised by Assocham. Attending their functions was therefore a waste of time, she added. To be specific, the minister lamented that companies had built only 300 toilets for girls' schools in the entire country so far, which was woefully inadequate, something that has even disappointed the prime minister. This was serious.

Let us look at the numbers first. The Bharti Foundation, run by the Mittal family, has already handed over some 4,000 toilets in the Ludhiana district of Punjab, and another 2,000 or so are under construction. According to information collated by the Confederation of Indian Industry, or CII, 20 companies - Indian- as well as foreign-owned - have built toilets in 2,604 schools so far. The largest contributor in this group is TCS (1,433 toilets), followed by Mahindra Group (373), Coca-Cola (167) and Cairn India (161).

In addition, some smaller companies have got together and asked CII to build toilets on their behalf. So far, CII has constructed 125 toilets. Each toilet usually comprises three urinals and a WC for boys and four WCs for girls. Havells on Thursday mandated Banka Bio of Hyderabad to build 50 toilets in the Alwar district of Rajasthan. In another three months, it hopes to award the contract for another 50 toilets. All told it plans to build toilets in about 400 schools in Alwar.

Of course, this is way short of the target, as Ms Gandhi said. But it is not easy to build toilets - there are practical problems.

Most companies want to build toilets in areas where they operate or have some connection. You can't fault them for that. Many Maharashtra-based companies found that most of the blocks in the state were taken within no time. It takes a leap of faith for a Mumbai company to build toilets in a remote village in Bihar. That was the first hurdle they faced.

Many began to ask who would maintain the toilets. If not maintained properly, they will become non-functional in no time. It amounts to throwing money down the drain. There has been stony silence on this subject. Only a handful of states, which includes Gujarat, Andhra Pradesh and Uttar Pradesh, have set aside some money for the maintenance of toilets. Some states like Rajasthan have appointed two sweepers for every school but absenteeism amongst them is high.

Then there are problems of implementation at the ground level. The school in question and the village council have to be in agreement for the construction, and this consensus is not easy to achieve. Havells chose Alwar because it already provides mid-day meals in over 600 schools there, and therefore understands the ecosystem better. To go to a totally new place means dealing with a whole new bureaucracy, which can sap anybody's energy.

Deterred by these problems, many companies have taken the other route: they have donated serious money to the Swacch Bharat Kosh, which aims to improve sanitation, primarily in schools. Bajaj Auto, ITC and L&T are together learnt to have donated almost Rs 90 crore to the fund. So Ms Gandhi is right in saying that progress has been tardy, but, given the situation on the ground, it is not bad. If India ranks poorly in the ease of doing business, it doesn't fare any better in the ease of doing CSR.

All this apart, Ms Gandhi's chastisement of the industry associations amounts to charity by coercion. It is not the job of companies to build toilets, or to do social work. Their job is to maximise shareholders' returns. It is businessmen who do charity, not companies. And there can be no compulsion in this. The United Progressive Alliance made it mandatory for companies to spend two per cent of their net profits on CSR. That was nothing but arm-twisting. The current government obviously wants to continue the unnecessary penalty.

Compulsory CSR was a knock on the bottom-line, yet few businessmen chose to speak out against it. Why? Simply because it helps them curry favours. It has given birth to a whole ecosystem of contracts, kickbacks, pilferage - the works.

This leads to a larger point: are private companies responsible for achieving the social objectives of the government? The answer is no. Yet, there are enough examples of how the government has passed on its financial responsibility to the private sector.

Look at price caps on drugs. The consequences have been disastrous. A recent report by IMS Health, a healthcare market research agency, notes there has been a drastic decline in launches as well as consumption of price-controlled medicine in the last few years. Drug makers have simply decided to focus on drugs that are outside price control. According to the study, the consumption of price-controlled medicine has dropped four per cent in the last two years in the rural markets, whereas that of other medicine has gone up five per cent.

A better idea is to do away with price controls, and the government should subsidise medicine for the poor out of its own pocket. The distortions noticed by IMS wouldn't have happened. But that calls for a whole new approach towards social welfare.

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First Published: Thu, July 16 2015. 21:46 IST