Companies are increasingly spending more on Corporate Social Responsibility (CSR) initiatives, according to a latest research from PRIME Database. CSR spends by NSE-listed companies saw a huge increase of 28 per cent in 2015-16. Even within CSR, the contribution to prime minister's relief fund saw the highest increase of 418 per cent, from Rs 168 crore in 2014-15 to Rs 701 crore in 2015-16.
The CSR law, which came into force in April 2014, mandates companies to invest 2 per cent of their net profit in CSR projects. Companies with net worth of Rs 500 crore and above or revenue of Rs 1000 crore and above or net profit of Rs 5 crore and above have to spend 2 per cent of average net profits of last three years.
According to PRIME Database, the average net profit of 920 NSE listed companies over last three years was Rs 4.60 lakh crore (2014-15: Rs 4.22 lakh crore). As per CSR requirements, amount required to be spent by such companies was Rs 9,146 crore (2014-15: Rs. 8,372 crore). The companies, however, went one step further and decided to spend Rs 9,309 crore instead (2014-15: 8,606 crore)—Rs. 163 crore more than the requirement.
Under the companies act, there are nine different schedules under which spends can be made. These are promotion of education, eradication of hunger and poverty, gender equality, environmental sustainability and prime minister's relief fund among various others. Education received the maximum spends followed by Healthcare.
Reliance Industries, NTPC, ONGC, TCS, ITC and NMDC spent the highest amount on CSR because of their profits being higher. Companies that saw maximum increase in CSR spends compared to last year include NTPC, Power Finance Corporation, GAIL, REC, TVS Motors and Power Grid among others.
"PSU spending saw a huge increase of 41 per cent from previous year. On an overall basis, 48 PSUs spent Rs 2,078 crore in 2014-15. This went up to Rs 2,936 crore by 47 PSUs in 2015-16", says Pranav Haldea, managing director, PRIME Database.