JOIN USDevelopment process sans catalyst
It is indeed heart-warming to observe the collaborative efforts of the government, civil society organisations (CSO) and citizens in attempting to combat the COVID-19 pandemic. Chanting the mantra of togetherness, CSOs plunged into action on the ground and expanded the reach of humanity.
The government initiated an exclusive website to onboard CSOs officially. Our political leaders also called for solidarity, and participation of CSOs for aiding relief to the needy. While this being the story on one part, another arm of Union government had released the draft Companies (Corporate Social Responsibility Policy) Amendment Rules, 2020 for people’s comments.
In consideration with the proposed amendments, the Ministry of Corporate Affairs (MCA) doesn’t seem convinced on the importance of CSOs in the development of the nation, neither in the history, nor with the contemporary evidences. But for long, CSOs have strived as a catalyst in expediting the development process, be it for eradicating polio from India, reducing the prevalence of HIV, pioneering the concept of women self-help group for poverty alleviation at the micro level or plating a pivotal role for bringing progressive public policies at the macro level.
Omission of Trusts and Societies: The CSR ecosystem is proposed to take a substantial shift as the amendments prescribe a change in the eligibility of entities who undertake CSR activities. The proposed draft rule 4(1) clarifies that the CSR implementation can be undertaken either by Section 8 companies or any entity that is established under the Act of Parliament or State Legislature, thereby omitting the role for civil society organisations registered as Trusts, Societies and under other legal provision.
Entities such as Trusts, Society or Section 8 Companies are eligible for tax exemption u/s 12AA of Income tax, donations to all three entities are eligible for tax deduction u/s 80G and all three are eligible to register under FCRA 2010. Neither income tax nor the MHA (under FCRA) offers preferential treatment towards Section 8 – for company over other organisations.
The sole mention of Section 8 companies or entities would result in the mushrooming of new Section 8 companies to become eligible to avail CSR activities. Also, most Section 8 companies seldom have community experience of the grassroots functioning. The omission of organisations registered under trusts and societies is certainly a discriminatory move. If there is any genuine reason, the sector deserves an explanation at least.
The draft amendment proposes through Rule 4(3) that a company can engage international organisations for designing, monitoring, evaluation, and even for implementation of the CSR projects, following prior approval of the government. It is a known fact that international organisations would not have the geographical reach. Therefore, their focus of work might get limited around the companies’ establishment and urban areas to their convenience.
Prior approval
To manage their absence at the grassroots, international agencies would have to depend on local organisations for programme implementation. This might only add another layer leading to an unnecessary increase in operational expenditures, reducing investments that benefit the primary stakeholders. Furthermore, the method of seeking the mentioned prior approval is not laid down in the draft.
The thematic or technical know-how is not just enough to take up developmental activities. It mainly requires the competence of working with community and understanding its dynamics. Knowledge and respect towards culture, practices and rights of the community should be at the core while serving the community.
The total amount spent by India Inc through its CSR in the recent fiscal report was Rs 8,691 crore. The CSR money spent across the four financial fiscals (up to 2018) was around Rs 50,000 crore and the unspent amount is higher at Rs 60,000 crore during the same period. This shows that CSR investment towards development projects needs a serious improvement. The contribution of CSR funds towards CSOs is significant amidst the declining foreign funding of recent times.
While CSR investments may seem insignificant in front of philanthropic and government contributions to the development sector, it has inspired to innovate, and leveraged the use of information technology to respond to developmental challenges effectively. Importantly, the CSO’s overhead expenditure, which is crucial for sustenance are complimented by CSR grants which has been curtailed by other donor agencies.
India’s committed CSOs have been working with limited or no resources. Responsible corporate houses have been supporting these CSOs despite any statutory mandate due to their understanding of the importance and ethos of CSOs. Development practitioners appreciate the move of government to regulate CSR investments. The regulation has certainly made corporates to consider the CSR expenditures as a development investment as it is considerate sum now. This is good as it makes every stakeholder accountable.
The new era of CSR has contributed many new solutions for age old problems with the changing causality. The CSOs have been the forerunners of bringing about progressive changes in the society. This should only be further harnessed and not jeopardised.
(The writer is Executive Director, Grassroots Research and Advocacy Movement (GRAAM), a public policy think-tank and CSR consulting organisation)