Saurabh
Asked June 21, 2013

Regulation of 2% committed CSR from PAT, NGO portion of CSR amount

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After regulation of 2% committed CSR from PAT, what are the condition an NGO or non-profit organization need to fullfil for the eligibility of getting the portion of CSR amount?

Answer 1

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Shouvik Kumar

First of all, allow me clarify an issue that is a source of common misconception. The increase in budgetary slab to 2% of Profit After Tax for CSR activities is not prescribed by any mandatory regulation as yet. The sources from where such increase is cited include the National Voluntary Guidelines for Social, Environmental and Economic Responsibilities of Business issued by the Ministry of Corporate Affairs, the Guidelines on Corporate Social Responsibility and Sustainability for Central Public Sector Enterprises etc. The latest amendments being mooted to the Companies Act, 1956 indeed propose to make CSR commitments mandatory, but as yet, that has not taken the role of an operating legislation. Therefore, there's no penal step that can be taken by a company not exhibiting such commitments, although the Ministry can delay/refuse registrations or other regulatory approval if they look upon such a company with lack of favour.As a result of there being no mandatory provision, there's also no clear conditional prerequisite to be fulfilled by an NGO that would entitle it to such CSR funding. Each company can choose its own policy regarding nature, credibility, duration of operation, nature of projects undertaken etc. by such an NGO to make it qualify. It'll thus be an internal policy matter subject to shareholder approval. There are some suggestions that can be made though, that would increase the NGO's chance of qualifying, viz. registration under the prevailing laws, regular submission of prescribed documentation including audited accounts etc., undertaking projects that have been marked favourable as per the target company's CSR Policy, adhering to internationally and nationally prescribed standards for legal compliance, financial diligence, governance, transparency and accountability etc., getting credibility ratings from recognized agencies like Credibility Alliance etc.

Also remember that as per the aforesaid guidelines for CPSE, priority should be accorded to activities pertaining to: i) inclusive growth of society, with special attention to the development of weaker sections of society and the backward districts of the country, and ii) environment sustainability. Therefore, it will be mandatory for all CPSEs to select one project in each of the two categories of these CSR and Sustainability activities.

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