Karnataka: CSR money flows to power centres, avoids backward regions

Hubballi: Karnataka has collected a total of Rs 8,889 crore corporate social responsibility (CSR) funds over the past five financial years. Nearly 43% of the CSR funds has been channeled into the education sector, with a focus on school infrastructure development.

With 2,969 companies actively contributing CSR funds in the last five years, Karnataka ranks fifth in the country in CSR fund collection. The flow of CSR funds has increased from Rs 1,448 crore in 2019-20 to Rs 2,255 crore in 2023-24, a rise of 55.74%. 

As per the Companies Act, 2013, companies are required to spend at least 2% of their average net profit from the three preceding financial years on any of the 24 development sectors listed in the Act.

Experts say companies typically invest in sectors that benefit local communities, bring them goodwill and provide visibility. 

Education, healthcare, environmental sustainability, rural development and sports training have emerged as the priority sectors in the state. Sectors such as safe drinking water, senior citizen welfare, slum development, gender equality have received minimal funding. Abhishek Modi, senior engagement manager at Sattva, which analyses CSR fund utilisation across India, says there are visible improvements in education, health, rural development and skilling in the state through CSR funds. 

“Though rules do not restrict companies geographically or sectorally, companies usually invest in areas where they operate or a place where their products are in demand,” he said.

Data shows that nearly 60% of the CSR funds are used on physical infrastructure development.  

Investment patterns also show stark regional disparities. For instance, two aspirational districts Raichur and Yadgir have received only Rs 59 cr and Rs 5 cr respectively, despite housing hazardous industries. In contrast, Mysuru (Rs 304 cr), Dakshina Kannada (Rs 250 cr) and Dharwad (Rs 155 cr) drew significantly more. 

“Companies avoid investing in aspirational districts, either because they don’t have direct business relevance or the community’s needs don’t align with their expertise,” said a Bengaluru-based researcher. 

Bengaluru Urban presents a curious case. The district received Rs 1,074 cr in 2021-22 and just Rs 2.98 cr in 2023-24.

Experts point to political influence in CSR allocations. Haveri, the home district of former chief minister Basavaraj Bommai, received Rs 27 crore between 2021 and 2023, a 12-fold jump from previous years. Mysuru, chief minister Siddaramaiah’s home district, saw CSR investments rise from an average of Rs 25 crore annually earlier to Rs 200 crore in 2023-24, after he took office.

“Most companies do not specify the districts they fund. Also, there is little clarity on actual fund usage,” said another expert, who recommended forming a committee with government officials, subject experts and company representatives as members to ensure transparency.