No other country has such a provision, though many expect their companies to take care of their workers, follow labour laws and desist from exploitation in business.
Labour laws are being reconsidered, with the Mines and Minerals Development and Regulation Bill, almost ready for Parliament. This would state the responsibilities of companies, in terms of what they would give workers and those on whose land mines are dug and wealth extracted.
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If passed, the mines Bill would mean an estimated payout of about Rs 15,000 crore from mining companies towards community development, in both coal and non-coal sectors. CSR payment, according to the Companies Bill, would extract about Rs 12,000 crore from companies, if listed and unlisted companies are taken into account. While the mines Bill is about the rights of the people on whose land business is carried out, CSR, according to the Companies Bill is a matter of policy, something being questioned by companies and civil society.
Economist Ashwini Kumar of the Tata Institute of Social Sciences, selected as a CSR hub by the Department of Public Enterprises, terms the move towards mandatory CSR dangerous, "given the crony capitalist nature of the economy". There is a risk of companies using CSR as a garb for advancing their business interests by funding non-governmental orgaisations (NGOs) and securing popular consent for activities that include land acquisition, he says, echoing the fears of many civil society members.
Examples of such use of CSR are rampant wherever mining activities are common and land is hard to acquire. Kumar points to many youth clubs - funded by CSR- across Odisha, Chhattisgarh, Jharkhand and Karnataka's Bellary district. These, he says, are nothing but groups trained to bully and coax villagers to agree to land acquisition by companies. And, many NGOs, either owned by companies or politicians, are floated to exploit CSR funds. The Companies Bill does not provide for a regulatory body to supervise CSR and, therefore, it could be used in any manner, says a worried Kumar.
Industry, too, is concerned. Sources in the Confederation of Indian Industry (CII) say asking companies to spend money on charity distracts them from their primary goals. During a slowdown, should one expect a company to mend its fortunes or engage in charity, asks a CII functionary.
CII Director General Chandrajit Banerjee says CSR initiatives should evolve naturally, adding these shouldn't be forced on companies. Legal provisions could stifle companies' innovative strategies for social good, he says.
Also, nowhere does the law provide for the welfare of employees as a goal of CSR. CII hopes the rules being drafted for the Act would ensure this. It fears while currently, companies aren't penalised for failure to spend two per cent of profits on CSR, eventually, such a penalty is possible, as a growing number of companies are found failing in this regard.
What the law doesn't consider is a company's priority should be to ensure minimum wages and a good working environment for its workers, not adopt 100 villages, as many companies have done.
According to Charities Aid Foundation, which has been helping companies with CSR projects, public sector undertakings alone could provide Rs 3,000 crore towards CSR, if two per cent of their profits are taken into account. If listed companies are also included, it would yield Rs 7,000 crore.