Department of Public Enterprises has not received Social Audit Report to track CSR funds: Minister of State for HIPE in the Lok Sabha

By Onkareshwar Pandey

Indian Observer Post

New Delhi, December 18, 2018: The CSR expenditure by CPSEs has registered declining trend in the last three years. One hundred six CPSEs incurred an expenditure of Rs. 4028.04 crore during 2015-16, 126 CPSEs Rs. 3336.50 crore during 2016-17 and 152 CPSEs Rs. 3442.38 crore during 2017-18, for undertaking CSR activities and projects.This information was given by Shri Babul Supriyo, Minister of State for Heavy Industries & Public Enterprises in the Lok Sabha today. However, Department of Public Enterprises has not received any Social Audit Report to track CSR funds by CPSEs, Minister of State stated.

Central Public Sector Enterprises (CPSEs) are those companies in which the direct holding of the Central Government or other CPSEs is 51% or more.

As on 31st March 2017, there were 331 CPSEs (excluding insurance companies). Of these, 74 enterprises were yet to commence commercial operations. Remaining 257 were operating enterprises (including 180 scheduled CPSEs

Of the 180 scheduled CPSEs, as on November 2017, 64 companies fell under Schedule 'A', 67 companies fell under Schedule 'B', 45 companies fell under Schedule 'C' and 4 companies fell under Schedule 'D'. The Schedule-wise list is as under:

As per CSR provisions of Companies Act, 2013, CSR activities are taken up by the CPSEs on the recommendations of CSR Committee constituted with the approval of Boards of respective CPSEs. All CPSEs qualifying for CSR expenditure are mandated to implement CSR activities and projects out of the activities listed in the Companies Act, 2013 in pursuance of their CSR policy by following the procedure as notified by Ministry of Corporate Affairs in Companies (CSR Policy) Rules, 2014.

While CSR initiatives have been in vogue in the Indian corporate arena for the last few decades, of late, it is being used as a business strategy voluntarily by the companies. However, Corporate Social Responsibility (CSR) has assumed added significance in India in the contemporary centrality particularly among the CPSEs, because CSR spending has been made mandatory in respect of CPSEs by the Companies Act, 2013.

Thus, on the one hand there is statutory compulsion to adopt CSR in respect of CPSEs while on the other hand there are many instances of even private companies going for voluntary CSR activities.

Department of Public Enterprises (DPE) is the nodal Department for Central Public Sector Enterprises (CPSEs) but it does not have any CPSE under its direct administrative control. The CPSEs function under various Ministries and Departments of Government of India.

The Background of CPSEs

When India achieved independence in 1947, it was primarily an agricultural country with a weak industrial base. The national consensus was in favour of rapid industrialisation of the economy which was seen as the key to economic development, improving living standards and economic sovereignty, Wikipedia records.

According to reports, building upon the Bombay Plan, which noted the requirement of government intervention and regulation, the first Industrial Policy Resolution announced in 1948 laid down broad contours of the strategy of industrial development. Subsequently, the Planning Commission was constituted in March 1950 and the Industrial (Development and Regulation) Act was enacted in 1951 with the objective of empowering the government to take necessary steps to regulate industrial development.

Prime Minister Jawaharlal Nehru promoted an economic policy based on import substitution industrialisation and advocated a mixed economy.

He believed that the establishment of basic and heavy industry was fundamental to the development and modernisation of the Indian economy. India's second five year plan (1956–60) and the Industrial Policy Resolution of 1956 emphasised the development of public sector enterprises to meet Nehru's national industrialisation policy. Indian statistician Prasanta Chandra Mahalanobis was instrumental to its formulation, which was subsequently termed the Feldman–Mahalanobis model.

The major consideration for the setting up of PSUs was to accelerate the growth of core sectors of the economy; to serve the equipment needs of strategically important sectors, and to generate employment and income. A large number of "sick units" were taken over from the private sector. Additionally, Indira Gandhi's government nationalised fourteen of India's largest private banks in 1969, and an additional six in 1980. This government-led industrial policy, with corresponding restrictions on private enterprise, was the dominant pattern of Indian economic development until the 1991 Indian economic crisis.

After the crisis, the government began dis-investing its ownership of several PSUs to raise capital and privatise companies facing poor financial performance and low efficiency.

Governance

Certain public sector undertakings have been awarded additional financial autonomy. These companies are "public sector companies that have comparative advantages", giving them greater autonomy to compete in the global market so as to "support [them] in their drive to become global giants". Financial autonomy was initially awarded to nine PSUs as Navratna status in 1997.

In 2010, the government established the higher Maharatna category, which raises a company's investment ceiling from Rs. 1,000 crore to Rs. 5,000 crore.

The Maharatna firms can now decide on investments of up to 15 per cent of their net worth in a project while the Navaratna companies could invest up to Rs 1,000 crore without explicit government approval. Two categories of Miniratnas afford less extensive financial autonomy.

Photo - Representational - File