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The government would rate non-profit organisations according to their past performance, so that it helps companies effectively discharge their corporate social responsibility (CSR) under the new Companies Act, 2013.
According to the Act, companies have to spend at least two per cent of their average profit of the last three years on activities such as eradication of poverty, education, contribution to the prime minister’s relief fund and women’s empowerment.
“The companies can’t do this directly. They would have to depend on non-governmental organisations (NGOs), trusts and civil societies. To help them identify the right agency, we would give accreditation to NGOs based on their performances of the last three years,” said Bhaskar Chatterjee, director general and chief executive officer of Indian Institute of Corporate Affairs (IICA), a body under the Ministry of Corporate Affairs.
“For this, we are partnering with the Tata Institute of Social Sciences,” added Chatterjee. He is said to be the brains behind drafting the draft CSR rules, for which public comments have been invited till October 8. He was speaking at a seminar organised by a non-profit organisation, Centre for Ethical Life and Leadership.
The government estimate suggests 8,000 companies would contribute Rs 12,000- Rs 15,000 crore for CSR activities under the Companies Act.
On Monday, the BSE and IICA signed a memorandum to develop a corporate social responsibility index. The index would assess the impact and performance of companies listed at the BSE in CSR activities. The index would also look at the performance of companies in their mandatory CSR spend according to the new Act.
Chatterjee said the Act provisions jail terms and fines for directors and independent directors for failing to implement the mandatory CSR spend. For instance, under the draft rule, the government has proposed a minimum fine of Rs 50,000 on companies and depending upon the situation, it could go up to Rs 25 lakh. Officers defaulting might face a punishment of a three-year jail term and a fine of Rs 5 lakh.
S Y Quraishi, former election commissioner, said the list of eligible activities under the rules was restrictive rather than enabling. “It is imperative to address these issues if the desired impact is to be achieved.”
