Corporates would have discretion to decide on what can be considered as corporate social responsibility (CSR) activities under the new Companies Act, Union Minister Sachin Pilot said on Friday.
Under the Companies Act, 2013, certain class of entities are required to shell out two per cent of their three-year average annual profit towards corporate social responsibility (CSR) activities.
Describing CSR as a new idea being included in the legislation, Pilot said the Ministry is giving only suggestive items regarding such activities.
The Schedule VII of the Companies Act provides a list of activities which may be considered as CSR. The schedule also mentions that "other matters as may be prescribed" could be CSR work.
Referring to this schedule, Pilot said that he was going to replace 'as may be prescribed' to "as the company deems fit".
"I can't be more liberal than that," he told a gathering of businessmen here.
Pilot, who was instrumental in pushing the new Companies Act as Corporate Affairs Minister, said that CSR norms would be framed in a transparent manner and kept as "open ended as possible".
His comments came at an event organised by industry body CII against the backdrop of some corporate leaders raising concerns about the idea of CSR in the new legislation.
Noted industrialist Rahul Bajaj expressed some concerns about certain aspects of the Companies Act including those related to CSR and rotation of auditors.
"To me CSR is the least important...," Bajaj said.
Certain class of profitable companies are required to spend two per cent on CSR activities as per the new legislation. This would be applicable for corporates with turnover of Rs 1,000 crore and more, or net worth of Rs 500 crore and more, or a net profit of Rs 5 crore and more.
Among the activities for CSR under Schedule VII are reducing child mortality and improving maternal health and contribution by companies to the Prime Minister's National Relief Fund or any other fund set up by the central or state government for socio-economic development.
"The success of this (CSR) would depend on how this is received by the Indian corporates. I am open to all suggestions," the Minister said.
Pilot also stressed that religious donations does not look like CSR.
Going by estimates, the annual CSR spending by companies is expected to be around Rs 15,000-20,000 crore.
The Ministry is in the process of making rules for implementation of the new Act. .
Leading industrialist Adi Godrej urged the minister to ensure that implementation of new Companies Act does not create more problems for doing business in the country.
"Ease of doing business is already quite poor in India...
So let's try and see that the implementation of the new Companies Act does not create further problems in ease of doing business.
"Rules should be liberal to start with and then the rules may be amended as and when required," Godrej said.