Keeping Track of Spending Violations

OVER A DECADE has passed since India mandated that every company that qualifies certain turnover, net worth, and net profit criteria spend at least two per cent of average net profits of the three preceding years on Corporate Social Responsibility initiatives.

Two issues that commonly crop up when enforcing CSR rules have been the quantum of spending, and the quality of spending. The Comptroller and Auditor General (CAG) of India recently pulled up five PSUs for diverting CSR funds to non- CSR activities. The Registrar of Companies also issued notices to 272 companies for alleged non-violation of its provisions in 2015-16. In this backdrop, establishing a Centralized Scrutiny and Prosecution Mechanism to track violation of CSR provisions in April 2018 is a welcome move. It is also time to fine tune the approved list of CSR activities at a granular level to make it less unambiguous and less prone to interpretations.