CSR in times of a pandemic

Topics CSR | CSR spending | corporate

Thirty years after economic liberalisation, the Indian corporate sector remains ultra-sensitive to the signals from Raisina Hill. Nothing reflects this more than the manner in which companies have been falling over themselves to invest in Covid-19-related health infrastructure in this second wave if the deluge of breathlessly worded PR press releases in the mailbox is anything to go by.   Last year, the missives, couched in the same upbeat tones, were all about helping migrant workers. When the CSR provision was introduced in 2013 by United Progressive Alliance, CSR concerns were all ab.....
Thirty years after economic liberalisation, the Indian corporate sector remains ultra-sensitive to the signals from Raisina Hill. Nothing reflects this more than the manner in which companies have been falling over themselves to invest in Covid-19-related health infrastructure in this second wave if the deluge of breathlessly worded PR press releases in the mailbox is anything to go by.

 

Last year, the missives, couched in the same upbeat tones, were all about helping migrant workers. When the CSR provision was introduced in 2013 by United Progressive Alliance, CSR concerns were all about education, a particular focus for Manmohan Singh under whom Parliament passed the Right to Education law. Since “women’s empowerment” was also the flavour of the decade, savvy companies combined the two to focus on — or at least tell the press about — their CSR investments in educating women and the girl child.

 

When Narendra Modi came to power in 2014, the locus of corporate social concern appeared to switch to building toilets, a nod to his signature Swachh Bharat Abhiyan campaign to make India open-defecation-free. Since educating the girl child remained a prime ministerial concern too, publicity about those investments continued apace. Occasionally, “environmental sustainability” made an appearance.

 

And it went until this government suddenly chose to view non-compliance of a provision that is essentially “comply or explain” in punitive terms, sending notices to companies that had not made CSR investments. This was in 2019 when the cumulative impact of demonetisation and the rushed implementation of the Goods and Services Tax crimped economic growth and corporate profits so that CSR investments more than halved from Rs 18,655 crore to Rs 7,823 crore. Piyush Goyal later clarified that this “compulsory” imposition was an “accident” that would be corrected.

 

Instead in early 2021, as corporate growth felt the impact of the national lockdown and CSR budgets (which have to be a percentage of profits) shrank further, the government doubled down on corporate requirements, imposing a fine of Rs 25 lakh for non-compliance (which was, however, decriminalised) and significantly upped the compliance paperwork.  Luckily, the highly controversial and clunkily named Prime Minister’s Citizen Assistance and Relief in Emergency Situation fund, which conveniently abbreviates to PM-CARES, became eligible for CSR funding last year, solving the problem for most regime-sensitive corporations. 

 

The basic conceptual problem with this UPA-era law that the NDA has embraced with gusto can be seen in the toilet-building frenzy that gripped India Inc in 2017-18. From Maruti Suzuki to ONCG and NTPC, and even Boeing, hundreds of companies invested in building toilet infrastructure in villages and moffusil towns. Though this collective effort was useful, it did not materially change India’s record on open defecation until the PM and his talented IAS man Parameswaran Iyer got into the act.

 

In other words, the transformational impact of CSR, which was the raison d’etre for the law in the first place, is limited by definition. Then, there’s the question of aligning CSR to governmental priorities: As “causes” fall in and out of vogue, so do investments. This is one reason CSR investments in education have fallen away even though India remains seriously starved of quality education. If the collective CSR effort on easing the plight of migrant labourers — the standout victims of last year’s lockdown — had really been as effective as they claimed, fewer workers would have fled back to their villages when the second wave struck.

 

Such fickleness does not serve any purpose beyond burnishing the image of the corporation. But these issues acquire gravity in the context of the assets companies say they are creating to deal with the second wave of the Covid-19 pandemic —  oxygen plants, field hospitals, isolation wards and the like. The new CSR rules require assets created through CSR money to be transferred to the beneficiaries of the project, or a section 8 (not for profit) company or a public authority. Since the beneficiaries of these Covid-19 assets are transitory, that leaves the company with the last two options.

 

But as long as those assets remain idle, which must be happening now that the second wave is thankfully receding, companies will be in the bizarre situation of meeting their CSR spending mandate but without utilising the assets that have been created. This idling could be prolonged if by the greatest of luck India avoids a third wave of the pandemic. It is a fair bet that many facilities will be dismantled once the threat recedes, a massive waste of energy and resources in healthcare-poor India. 

 

Instead of merely dumping an obligation on companies, it would be useful if the government worked on a model that enabled it to sweat those CSR assets in a redistributive partnership. An oxygen plant or hospital hastily set up in Gurgaon, for example, could profitably be transferred to, say, Nuh. This would help over the longer term in creating the more robust and equitable healthcare infrastructure that is critically absent in Indian today. The CSR mandate is a flawed concept. But the pandemic offers one route to making it work to India’s advantage in the longer run.



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